By Tatsuo Ito

The dollar fell short of breaking through the Y104 mark in Asia on Friday amid growing expectations that U.S. Federal Reserve chair Janet Yellen will not go beyond what she has previously said about interest rates in her speech at Jackson Hole, Wyoming, later in the global day.

At 0450 GMT, the dollar was at Y103.74 after earlier rising within striking distance of Y104 at Y103.96. It was at Y103.81 late Thursday in New York. The euro was at $1.3287 from $1.3281.

Currency traders have been keeping a close eye on U.S. Treasury yields to gauge the dollar's direction. On Thursday, the 10-year yield dipped despite relatively solid U.S. economic data.

Initial claims for unemployment benefit fell by 14,000 to a seasonally adjusted 298,000 in the week ended Aug. 16. That was slightly lower than a forecast of 302,000 new claims. Sales of existing homes increased 2.4% from June.

But the data didn't prompt a rise in U.S. bond yields "giving rise to the view that Ms. Yellen is not expected to say anything too hawkish," said Shinji Kureda, head of FX trading at Sumitomo Mitsui Banking says.

Takahiro Iizuka, trader at Mizuho Trust and Banking said the market has already priced in the likelihood that Ms. Yellen won't go beyond what was said at the Fed policy meeting in July. Minutes of the meeting, released Wednesday, offered a hawkish tone on the Fed's future monetary policy.

But with little expected to come from the speech, any hawkish comments will likely have an immediate impact on yields.

"If the tone of her comments is unexpectedly strong, that could push the U.S. 10-year Treasury yield up to 2.500% from the current 2.409%, boosting the dollar toward Y105.00," Mr. Iizuka said.

He added that caution was therefore still needed, especially after Federal Reserve Bank of San Francisco President John Williams said he expected the first central bank increase in short-term interest rates to come in little more than a year.

Mr. Williams has long held views close to those of most of the members of the monetary-policy setting Federal Open Market Committee. He is also seen as an ally of Ms. Yellen.

Mizuho's Mr. Iizuka added that feeble summer consumption in Japan, due in part to changeable weather and natural disasters in western Japan, could stoke expectations of additional easing by the Bank of Japan. Further BOJ action would support the dollar against the yen.

Data released Thursday showed that sales of 60 supermarket chains nationwide fell 2.1% in July from a year ago.

The WSJ Dollar Index, a measure ofthe dollar against a basket of major currencies, was down 0.07% at 74.39.

Interbank Foreign Exchange Rates At 00:50 EST / 0450 GMT

Latest Previous %Chg Daily Daily %Chg

2150 GMT High Low 12/31

Dollar Rates

USD/JPY Japan 103.72-74 103.83-87 -0.12 103.95 103.72 -1.50

EUR/USD Euro 1.3285-88 1.3280-83 +0.04 1.3287 1.3274 -3.33

GBP/USD U.K. 1.6583-86 1.6578-83 +0.02 1.6586 1.6572 +0.16

USD/CHF Switzerland 0.9106-10 0.9113-16 -0.07 0.9120 0.9109 +1.99

USD/CAD Canada 1.0930-34 1.0940-44 -0.09 1.0947 1.0932 +2.92

AUD/USD Australia 0.9319-20 0.9301-04 +0.18 0.9323 0.9302 +4.54

NZD/USD New Zealand 0.8408-12 0.8404-08 +0.05 0.8414 0.8390 +2.29

Euro Rate

EUR/JPY Japan 137.82-86 137.89-94 -0.05138.00 137.80 -4.77

Source: ICAP PLC

Write to Tatsuo Ito at

(END) Dow Jones Newswires

August 22, 2014 02:30 ET (06:30 GMT)

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