Dollar extends gains vs yen after US jobless data   
Published: Thursday, 18 Jul 2013 | 8:48 AM ET
By: Reuters with CNBC.com

[size=1em]The U.S. dollar extended its gains against the Japanese yen and hit a session high vs. the euro Thursday, after U.S. data showing that jobless claims dropped more than expected.

But Treasury yields were lower, making a sharp rally in the dollar—especially against the euro and the British pound—unlikely, traders said.

The dollar had been boosted by higher U.S. yields, but doubts over when the Fed will start withdrawing stimulus has kept it clear of three-year high struck on July 9.

In congressional testimony Wednesday, Fed Chairman Ben Bernanke said the central bank still expected to start scaling back its bond purchase program later this year, but left open the option of altering that plan if the economic outlook changed.

The dollar index edged up 0.2 percent to 82.91 on Thursday, staying above a three-week low of 82.342 set on Wednesday.

The euro slipped 0.3 percent to $1.3064, while sterling was flat around $1.5208.





How to position currencies for tapering


Aroop Chaterjee, director FX strategy at Barclays, says that Fed tapering will prompt a stronger U.S. dollar against high-yielding and emerging markets currencies such as the lira, rand and Brazilian real.


"We are bullish [the] dollar but we are getting mixed signals from the Fed," said Peter Kinsella, currency strategist at Commerzbank. "Fed tapering will be very data-dependant and if we get good jobs data next month, then we can expect stimulus withdrawal by September. Otherwise expectations of tapering will be pushed back to December. This uncertainty should keep it rangebound."

Bernanke is seen likely to stick to Wednesday's themes when he testifies to the Senate Banking Committee later on Thursday.
Hiroshi Maeba, head of FX trading Japan for UBS in Tokyo, said he expected the dollar to head higher gradually, given the divergent monetary policy outlook for the United States and other rich countries.