The dollar steadied yesterday ahead of the release of US inflation data after escalating tensions in the Middle East pushed oil prices higher, while the yen held stable amid caution over possible intervention and following remarks by policymakers regarding government pension fund allocations.
The dollar index, which measures the US currency's performance against a basket of currencies including the yen and the euro, fell 0.09% to 101.18.
Focus remains squarely on inflation data, with markets awaiting the release of the US Consumer Price Index for June, the Producer Price Index for June, as well as the first semi-annual testimony by Federal Reserve Chairman Kevin Warsh before Congress.
The euro rose 0.1% against the dollar to $1.1392, while sterling gained 0.09% to $1.3358.
Federal Reserve Governor Christopher Waller said interest rates may need to rise in the near term if data show that inflation remains well above the central bank's 2% target.
The yen rose 0.1% to 162.30 yen per dollar yesterday, despite traders remaining on watch for possible intervention by Tokyo authorities, as the Japanese currency continues to hover near 40-year lows.
The Japanese currency edged higher following remarks by Finance Minister Satsuki Katayama, who said Tokyo may consider adjusting the asset allocation of the government pension fund if sharp changes occur in asset management.
The yen and Japanese bonds rallied on Friday after Finance Minister Satsuki Katayama said the government would explore ways to encourage pension funds, including the Government Pension Investment Fund, to increase their investments in Japanese financial assets. The Australian dollar rose 0.26% to $0.6934. The New Zealand dollar gained 0.75% to $0.5791 as investor expectations for an interest rate hike increased.