By Michael Kitchen, MarketWatch
LOS ANGELES (MarketWatch) — The dollar edged lower Friday, easing further off its highs made Thursday but still holding some of its gains in the wake of signals that the Federal Reserve may trim its stimulus this year.
In the early East Asia afternoon, the ICE dollar index DXY -0.03% — which tracks the U.S. currency against six rivals — sat at 81.764, down from 81.823 late Thursday in North America.
Still, it remained above late Wednesday’s 81.301, and solidly above its level around 80.55 on Wednesday, when Fed Chairman Ben Bernanke indicated that the central bank could slow the pace of its bond buying later this year if the economy improves further.
Likewise, the WSJ Dollar Index XX:BUXX +0.01% , which uses a slightly larger comparison basket than the ICE index, slipped to 73.82 Friday from late Thursday’s 73.86.
Other major currencies traded broadly higher, recovering from their drops following the Fed developments, with the British pound GBPUSD +0.02% rising to $1.5505 from $1.5492 Thursday, and the Australian dollar AUDUSD +0.51% appreciating to 92.14 U.S. cents from 92.00 U.S. cents.
“We expect majors such as [the euro] to remain strongly capped [against the dollar] and that the risk is for additional downside,” they wrote. They said the market may be underestimating the possibility that the European Central Bank will become more aggressive in its monetary easing.
The Japanese yen USDJPY +0.50% proved an exception to the dollar’s downward motion, with the U.S. currency rising to ¥97.75 from ¥97.38 late Thursday.
While the dollar remained well below its mark at the end of last month, when it traded above ÂĄ100, the mild advance Friday helped Japanese stocks recover from heavy morning losses to swing to strong gains, with the Nikkei Stock Average JP:NIK +1.66% up 1.7% minutes ahead of the close.
Michael Kitchen is Asia editor for MarketWatch and is based in Los Angeles. You can follow him on Twitter at @KitchenNews.
