* Dollar/yen up a tad on slight improvement in risk sentiment
* Euro, yen hemmed in narrowest range in many months
* Sterling falls on Carney’s rate comments, weak UK retail data
* Swiss franc hits lowest level in 3 yrs vs euro
By Hideyuki Sano
TOKYO, April 20 (Reuters) - The British pound flirted with two-week lows against the dollar on Friday following comments from the Bank of England chief and soft UK retail sales data, while the yen eased as risk sentiment was on the mend.
Still, uncertainties on issues ranging from U.S. trade policies to North Korea and Syria kept many investors on hold, and the euro/dollar and the dollar/yen could see one of their narrowest weekly range in months.
Bank of England Governor Mark Carney dampened widespread expectations for an interest rate hike in May on Thursday, pointing out there were also “other meetings” this year.
Disappointing UK retail sales released earlier on Thursday also raised some doubts about the outlook for UK rate hikes.
The British pound fell to a two-week low of $1.4069 on Thursday and last stood at $1.4074.
Against the euro, it hit a three-week low of 0.87725 pound per euro and last stood at 0.8765.
The euro was little changed against the dollar at $1.2338 , having dipped 0.24 percent the previous day but still hugging its well-worn range.
This week it has moved in a range of only 89 pips, or 0.89 cent, between $1.2414 and $1.2325, which would match the trading range in the holiday shortened first week of January, which was the tightest since August 2014.
The euro changed hands at 132.64 yen, having hit a two-month high of 113.095 yen the previous day, supported by gradual recovery in risk appetite.
“I think the excessive nervousness about a trade war and other political risks has eased a tad. Still, with G20 finance minister meeting planned this weekend, market players are cautious,” said Kyosuke Suzuki, director of forex at Societe Generale in Tokyo.
The dollar firmed to 107.63 yen, up 0.25 percent on the day and edging near its seven-week high of 107.78 yen touched last week, after U.S. President Donald Trump apparently made no new fresh demands on trade at his meeting with Japanese Prime Minister Shinzo Abe earlier this week.
“For weeks, we have had a negative news one after another — trade wars, Syria, Russia, Facebook, Uber, Tesla, you name it. We haven’t been in an environment where investors can take risk,” said Koichi Takamatsu, chief of forex trading at Nomura Securities.
“But even after all that, the dollar didn’t fall further. And people who held back from buying dollars started to buy from yesterday,” he said
The dollar/yen pair has been also stuck in a narrow 0.845 yen range so far this week, which would be the tightest since the holiday-shortened last week of 2015.
Investors are expecting range-bound trade to continue in the yen, and the euro.
Implied volatilities on dollar/yen options and euro/dollar options have fallen to lowest levels in about three months.
Against the yen, the dollar has been marginally supported by a rise in U.S. bond yields.
The 10-year U.S. Treasuries yield hit a one-month high of 2.934 percent as higher oil prices fanned inflation expectations.
The inflation expectations calcurated by the gap between yields on inflation-linked bonds and conventional bonds rose to 2.18 percent, the highest level since August 2014.
Elsewhere, the New Zealand dollar fell 0.4 percent to $0.7240, hitting its lowest levels in more than two weeks and extending its drop following Thursday’s weak inflation data.
The Swiss franc hit its lowest level in more than three years, sliding below 1.20 per euro for the first time since the Swiss central bank scrapped its ceiling for the Swiss currency in January 2015.
The franc is in part weighed by expectations that the Swiss National Bank (SNB) will stick to loose monetary policy even as the ECB looks to wind down its stimulus.
Editing by Sam Holmes and Kim Coghill