* Yen retreats a touch, still on track for best week in a month
* Euro inches higher, Greek debt deal underlines supportive flows
* Dollar index heads for biggest weekly fall in 9 months
* Aussie down 0.4 percent
By Patrick Graham
LONDON, April 11 The dollar handed back some minimal gains
against the yen on Friday to end a week that has quashed any hint it could be
ready to deliver the strength many banks had predicted for this year.
The U.S. currency has lost 2.5 percent against the yen since last Friday,
weighed down by guidance from Federal Reserve officials that the U.S. central
bank is nowhere near as close to raising base interest rates as markets had
begun to believe.
That comes after two weeks of robust gains against the yen, and the clearest
signal yet that European policymakers are on the verge of starting to print
billions in extra euros, all of which had encouraged many to believe the dollar
was ready to break out higher.
In morning trade in Europe, it was down 0.06 percent against the yen
and 0.04 percent up against the euro at 101.46 yen and $1.3892
"The dollar is looking weak against the yen and sterling, while the euro
continues to surprise us," said Lee McDarby, executive director of UK corporate
FX sales at Nomura International Plc in London.
"Nothing has fundamentally changed in the US to account for this weakness,
but the dollar just can't seem to get any momentum."
The argument at the start of this year was that a recovering U.S. economy
and the steady tightening of monetary conditions that would result, while Japan
and Europe lag, would see the dollar gain.
Those backing that trade have been shaken out more than once already,
however, leaving the market stuck in tight ranges since a burst of activity
around an emerging sell-off in January.
"If (ECB President Mario) Draghi starts to take further action with regard
to the euro then we may see the dollar begin to finally regain momentum,"
McDarby said. "But right now it seems investors are unwilling to take too much
The dollar index last stood at 79.420, down about 1.2 percent so far
this week. If sustained, this will be its biggest weekly fall in nine months.
Underpinning this mix are a range of factors which leave many investors
suspicious the global economy is not on a particularly firm footing.
Dealers and strategists point to risks ranging from signals that China and
Japan will be very cautious at best with the provision of any further stimulus
to their economies, to worries over supplies of Russian gas to Europe and
falling consumer prices in several euro zone countries.
That has helped support the view that, now that the financial system is
beginning to normalise, prices of growth-related assets like stocks have been
inflated too high by the extra cash central banks have provided since 2008.
The Australian dollar, one of the commodity-linked currencies often seen as
a proxy for optimism over the global economy, fell almost half a percent
overnight as the Nasdaq U.S. tech stocks index saw its biggest daily loss since
"The Nikkei has also already been soft this week on the idea that Japan may
not after all be set to deliver more stimulus," said Jane Foley, a currency
strategist at Rabobank in London.
"When you add in the Chinese central bank saying is would be very cautious
in doing anything, then suddenly the market is confronted with the realisation
that monetary policy may not be quite as easy or supportive as they had
(Editing by John Stonestreet)