April 25, 2014 / 12:11 AM / in 4 years

FOREX-Dollar under pressure on rising Ukraine tension

* Dollar near 1-week low vs yen on rising Ukraine tensions

* Yen shrugs off slightly smaller-than-expected Tokyo April inflation

* Euro recovers from low hit on comments by ECB’s Draghi

By Hideyuki Sano

TOKYO, April 25 (Reuters) - The dollar came under pressure against the yen on Friday as rising tension in Ukraine undermined optimism about U.S. economic growth following strong U.S. durable goods data.

The dollar traded at 102.30 yen, near a one-week low of 102.085 hit on Thursday, after Ukrainian forces killed up to five pro-Moscow rebels on Thursday as they closed in on the separatists’ military stronghold in the east.

Russia launched army drills near the border in response, raising fears its troops would invade, while U.S. Secretary of State John Kerry said Washington is drawing closer to imposing more sanctions on Russia.

“Although the price action in the currency market has been limited so far, the escalation of tension in Ukraine is likely to keep markets risk-off,” said Kyosuke Suzuki, director of forex at Societe Generale.

Concerns over a wider conflict between the West and Russia overshadowed an otherwise brightening economic picture in the United States.

March U.S. durable goods orders rose 2.6 percent, above economists’ forecast for a 2 percent gain.

Wall Street shares were also resilient after Apple Inc jumped following its strong revenue growth as well as share buyback, although worries about Ukraine kept gains in check.

The yen showed limited reaction to Japan’s consumer price data, which showed core CPI rose 2.7 percent in the Tokyo area, slightly less than economists’ forecast of 2.8 percent.

As the impact of a consumption tax hike is estimated to have boosted the reading by 1.7 percentage points, the data suggested inflation has been essentially flat from March, when it rose 1.0 percent.

Although many investors expect Japan’s inflation to ease later this year, Bank of Japan Governor Haruhiko Kuroda has been bullish, saying inflation is firmly on a path to reach the BOJ’s target of 2.0 percent.

As Kuroda’s rosy economic view has weakened expectations of an immediate easing by the BOJ, thus helping to support the yen, many investors are looking to the BOJ’s economic outlook report due on Wednesday.

As the dollar comes under pressure, the euro stood at $1.3831, recovering from Thursday’s low of $1.3791 hit after European Central Bank President Mario Draghi reiterated the potential for asset purchases to ward off deflation risks.

He warned that a rising euro, which hurt the euro zone’s exporters, could force the ECB’s hand on monetary policy measures.

“The exchange rate is an increasingly important factor in our assessment of the outlook for price stability,” Draghi said.

The euro was also supported by an upbeat German business sentiment index despite recent tensions over Ukraine.

Editing by Richard Pullin

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