* Dollar index hovers near Thursday's 4-week high
* U.S. data later in the session could aid dollar
* Yen supported by Japan exporter flows
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 near its highest since early July at 0.3947
percent while the 10-year yield was firm at 2.76
percent, widening the gap between comparable German Bund yields
and lending support to the dollar.
The dollar index was at 81.994, not far from a
four-week high of 82.067 struck on Thursday after a
better-than-expected reading of second quarter gross domestic
product 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
and price index for July, the August Chicago Purchasing
Managers' Index (PMI) survey and University of Michigan
confidence data 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 was flat at $1.3235, not far from a two-week
low of $1.3219 hit on Thursday. The currency slipped from highs
after Eurostat said annual consumer price inflation in August
would be 1.3 percent, down from 1.6 percent in the previous
month. And while business confidence rose, unemployment remained
high at 12.1 percent.
Investors will be wary of buying the euro before next week's
European Central Bank interest rate policy meeting. ECB
policymakers are likely to reiterate their pledge that rates
will be low for some time as economic recovery sets in slowly.
"Euro zone unemployment shows that the real economy is in
dire straits and underlines that the ECB must keep monetary
policy super-accommodative for years to come," said David Brown,
economist at New View Economics.
The dollar eased 0.15 percent versus the yen to 98.205 yen
, off an intraday high of 98.48 yen. Traders said
dollar-selling by Japanese exporters at month-end helped the
The yen's rise was limited, however, due to ebbing of
safe-haven bids 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.