Dollar hits 3-week high vs yen on trade optimism; U.S. jobs data awaited

The greenback extended overnight gains and rose to 111.80 yen, its highest since March 15. It last traded at 111.695.

  
Light is cast on a U.S. one-hundred dollar bill next to a Japanese 10,000 yen note in this picture illustration shot February 28, 2013.

Light is cast on a U.S. one-hundred dollar bill next to a Japanese 10,000 yen note in this picture illustration shot February 28, 2013.

REUTERS/Shohei Miyano/Illustration

TOKYO - The dollar scaled a three-week high versus the yen on Friday, lifted by expectations that a protracted trade dispute between the United States and China would be resolved soon.

The greenback has gained about 0.85 percent against its safe-haven Japanese peer this week, thanks also to factors such as strong U.S. economic data and broad improvement in risk appetite.

The trade war between the world's two biggest economies has been a major distraction for financial markets over the past year, with riskier assets in particular taking a hit on worries about the broadening business and growth impact of the conflict.

U.S. President Donald Trump said on Thursday both countries were getting very close to a trade deal that could be announced within four weeks. 

On the economic front, investors will have an opportunity to gauge the health of the world's largest economy when the March U.S. jobs report is released at 1230 GMT.

"In particular, the focus is how strong the earnings component of the jobs report turns out to be. A strong wages outcome would underline robust private consumption and hasten the rebound in Treasury yields and in turn allow dollar/yen to test fresh highs," said Junichi Ishikawa, senior FX strategist at IG Securities in Tokyo.

The greenback extended overnight gains and rose to 111.80 yen, its highest since March 15. It last traded at 111.695.

The dollar has rebounded 1.8 percent since slumping to a six-week trough of 109.70 yen on March 25.

The U.S. currency had sunk to that low in the wake of a sharp slide by Treasury yields caused by risk aversion, triggered by growth concerns and a corresponding retreat by global equities.

Treasury yields have bounced since, with encouraging economic indicators and trade optimism helping propel Wall Street shares rebound to six-month highs.

"Hopes for a trade resolution have further boosted stock prices, but their gains now look too stretched," said Makoto Noji, chief forex and foreign bond strategist at SMBC Nikko Securities.

"The 'risk on' phase could be reaching a climax, and even if the United States and China do reach a trade agreement, that could trigger 'sell the fact' moves."

The dollar index against a basket of six major currencies was unchanged at 97.289 after rising 0.2 percent the previous day.

The euro was steady at $1.1225, capped firmly after data released on Thursday showed German industrial order dropped in February.

The pound was little changed at $1.3076 after shedding 0.7 percent overnight.

Sterling slipped on Thursday, snapping a three-day rising streak, as concerns rose that Britain may be headed for a protracted Brexit delay.

Britain could ask the European Union for a long Brexit delay next week if crisis talks between Prime Minister Theresa May's government and the opposition Labour Party fail to find a way out of the impasse over the divorce from the European Union.

The Australian dollar was a touch higher at $0.7121.

The currency has risen about 0.3 percent this week, supported as signs of progress in the U.S.-China trade dispute lifted risk assets and commodity prices.

(Reporting by Shinchi Saoshiro Editing by Shri Navaratnam and Sam Holmes) ((shinichi.saoshiro@thomsonreuters.com; Reuters Messaging: shinichi.saoshiro.reuters.com@reuters.net))

More From Currencies