* Dollar index hovers near Thursday's 4-week high
* U.S. data later in the day could aid dollar
* Yen supported by Japan exporter flows, soft Nikkei
By Anirban Nag
LONDON, Aug 30 The dollar held steady near
four-week highs versus a basket of currencies on Friday,
underpinned by expectations that upbeat U.S. data would prompt
the Federal Reserve to start withdrawing stimulus next month.
Investors were focused on economic data and interest rate
differentials as jitters about Syria subsided after the British
parliament rejected a motion supporting military action.
That was seen as a setback to Western governments looking to
punish President Bashar al-Assad for his alleged use of chemical
weapons against civilians.
The interest rate-sensitive two-year U.S. Treasury yield
traded at its highest in nearly two months at 0.3987
percent while the 10-year yield climbed to 2.78
percent, widening the gap between comparable German bund yields
and lending support to the dollar.
The dollar index was at 81.974, not far from a
four-week high of 82.067 struck on Thursday after better than
expected reading of second quarter gross domestic product data
and a drop in jobless claims bolstered the case for the Fed to
begin winding down stimulus next month.
On Friday, U.S. personal consumption expenditure (PCE) data
for July, the August Chicago Purchasing Managers' Index (PMI)
survey and University of Michigan confidence will be the focus.
"U.S. data like rising core PCE deflator and Chicago PMI
could come in on the stronger side," said Chris Turner, head of
FX strategy at ING. "We prefer to back the dollar here and look
for the index to push to 82.50/70."
The euro ticked 0.1 percent down to $1.3227, not far
from a two-week low of $1.3219 hit on Thursday.
Investors will be wary of buying the euro before next week's
European Central Bank interest rate policy meet. ECB
policymakers are likely to say they will keep rates low for
sometime as an economic recovery sets in slowly.
The dollar, though, eased 0.4 percent versus the yen to
97.95 yen, off an intraday high of 98.48 yen. Traders
said dollar-selling by Japanese exporters at the month-end
helped the yen.
The yen, which has been locked in an inverse correlation
with Tokyo shares for months, also gained some support as the
benchmark Nikkei share average fell 0.5 percent.
The yen's rise was limited, however, as safe-haven bids
ebbed as emerging Asian currencies such as the Indian rupee
and Indonesian rupiah regained a bit of calm
after a sell-off earlier in the week.
"Things have settled down compared to the situation we saw
before, in which Asian currencies were sold off," said a trader
for a Japanese bank in Singapore.