The dollar stayed in a consolidation mode on Friday after its rally to two-month highs ran out of steam with bulls looking for fresh guidance from the head of the US central bank.
The dollar index was last at 95.195, having pulled back from a peak of 95.661 set on Wednesday.
It is still up nearly 2.3 per cent this month, among the top performing currencies, after a string of Federal Reserve officials bolstered expectations for a hike in interest rates as early as next month.
“I’m not sure how concerted this whole thing has been. If it’s all kind of planned or if it’s just individual members speaking,” said Jesper Bargmann, head of trading for Nordea Bank in Singapore, referring to the Fed officials' relatively hawkish comments.
Yellen’s speech
Traders are now keen to hear from Fed Chair Janet Yellen, who is due to speak at an event hosted by the Harvard University Radcliffe Institute for Advanced Study at 1715 GMT.
“This is her chance if she wants to give a hint,” Bargmann said.
US GDP data
Also closely watched is the second estimate of the March quarter US gross domestic product.
Analysts polled by Reuters expect to see an upgrade of the earlier reading, which showed the economy grew at its slowest pace in two years.
The euro held steady at $1.1190, staying above a two-month trough of $1.1129 set on Wednesday.
The dollar edged up 0.1 per cent against the yen to 109.85, still down from a three-week high of 110.59 yen reached last Friday.
G7 summit
There was little reaction to the outcome of a two-day Group of Seven summit. The G7 industrial powers pledged on Friday to seek strong global growth, while papering over differences on currencies and stimulus policies.
“Specific to FX matters, the G7 communique was a non-event," said Heng Koon How, senior FX strategist for Credit Suisse Private Banking Asia Pacific.
Heng said the dollar is likely to trade with elevated volatility in the 110 yen to 105 yen area.
“At around the 10 per cent handle, the implied volatility curve for dollar/yen may be under valuing the growing list of event risks,” he said.
Potential risks
Such risks include the potential for more Bank of Japan monetary easing, as well as uncertainties related to the Fed meeting in June and the UK referendum on whether to stay in the European Union, Heng added.
The yen showed limited reaction to media reports that Japanese Prime Minister Shinzo Abe is considering delaying a sales tax hike, originally planned in April 2017, by around two years.
If Japan were to delay the planned sales tax hike, some market participants say the initial reaction may be for Tokyo shares to rise, which could weigh on the safe haven yen.
Still, a possible postponement of the sales tax hike has probably been mostly factored in, said a trader for a Japanese bank in Singapore, so any market impact may be limited even in the event of an official announcement to that effect.