Dollar firm after US data may quell recession fears By Reuters

By Kevin Buckland

TOKYO (Reuters) – The dollar settled near a two-week high against the yen after its biggest one-day gain against its major peers in four weeks as firm U.S. economic data all but brushed aside fears related to a recession.

The greenback was particularly strong against the Japanese currency thanks to a rise in Treasury yields as traders reduced bets that the Federal Reserve would be forced to ease aggressively next month.

Risk-sensitive currencies such as the pound were firm as an improved economic outlook sent shares higher.

which measures the greenback against six major peers including the yen, sterling and euro, was little changed at 103.20 after rising 0.41% overnight, the most since July 18.

The dollar eased slightly to 149.11 yen, but remained close to Thursday’s high of 149.40, a level last seen on Aug. 2.

The Commerce Department said retail sales rose 1.0 percent last month, beating forecasts for a 0.3 percent increase. Separate figures showed 227,000 Americans filed for unemployment benefits last week, less than the 235,000 expected.

Traders are confident the Fed will cut rates on September 18, but have debated the size of the cut. The odds are now 25% for a super-sized 50 basis point cut, down from 36% a day earlier, according to CME Group’s (NASDAQ: ) FedWatch tool.

Surprisingly weak monthly data since the start of the month pushed the odds of a further cut to 71%.

“Growth is in a better place and the consensus is again subscribing to the ‘slow landing’ thesis,” said Chris Weston, head of research at Pepperstone, pointing to 150 yen per dollar as the next level to watch for the currency pair.

“While there are always risks that could have an impact, there is little in the data stream right now to derail near-term sentiment immediately.”

Sterling edged up slightly to $1.2859, building on its 0.21% advance overnight. The British currency received a further boost from solid GDP figures on Thursday.

The euro was flat at $1.0973 after a 0.36% decline in the previous session.

The risk-sensitive Australian dollar was steady at $0.66105, having advanced 0.2% on the previous day, after data showed a much stronger than expected rise in jobs.