LONDON, Feb 20 - The dollar stormed to a six-week high against the yen and hit a two-week peak versus the euro on Friday while European stocks edged back from recent peaks after profit taking on Wall Street and a dip on Asian bourses. The weaker euro clipped European government bond prices with traders wary ahead of speeches later in the day from members of the European Central Bank's rate setting committee. Crude oil prices rose while the recovering dollar trimmed safe-haven gold and base metal prices. The dollar built on its two-day rally against the euro leaving traders to weigh whether the rally is sustainable or just a blip in the single currency's recent surge to life highs against the greenback. "We are seeing an unwinding of short dollar positions," said Mark McFarland, currency strategist at UBS. "The market is taking a breather before its next assault on $1.30."
The dollar gained 0.2 against the euro to $1.2642 stretching further away from Wednesday's low at $1.2927. With persistent intervention from Japan appearing successful in halting the dollar's slide against the yen, many traders were giving up on their short dollar positions, at least for now. The dollar rose close to one percent on the day to 107.75 yen against 3-1/2 year lows set earlier this month at 105.10. U.S. consumer price data for January is due at 1330 GMT and markets are also eyeing speeches today by a host of U.S. officials, including U.S. trade chief Robert Zoellick, Federal Reserve Bank of St Louis President William Poole and Fed board governor Ben Bernanke.
STOCKS, BONDS
European shares opened a touch lower, weighed down by a weak finish on Wall Street overnight and caution after a two-week rally lifted indices to fresh 19-month highs on Thursday. By 0915 GMT, the FTSE Eurotop 300 index <.FTEU3> of pan-European blue chips was 0.1 percent weaker at 1,016.5 points while the narrower DJ Euro Stoxx 50 index <.STOXX50E> shed 0.1 percent to 2,928.7 points. The Eurotop 300 has rallied four percent in the last two weeks and is already up more than six percent in 2004. Earlier Asian shares dipped with Japan's Nikkei <.N225> down 0.3 percent hurt by profit taking and weaker technology shares -- hit by key industry data on U.S. chip makers.
A broad index of regional shares <.MSCIAPJ> was down 0.4 percent. In New York on Thursday, the Dow Jones industrial average <.DJI> closed 0.1 percent weaker at 10,664.7 points. The tech-laden Nasdaq Composite <.IXIC> dropped 1.5 percent to 2,046.0 points. Euro zone government bond yields inched higher on Friday, eyeing the euro. Data showing the French economy expanded 0.5 percent in the fourth quarter of last year, compared with 0.4 percent in the third quarter had little impact. "We are completely linked to the euro these days," said one Frankfurt bond trader. "If the euro goes down, the Bund market will go lower. Everyone is euro watching." At 0915 GMT, the benchmark 10-year Bund yield was up 1.7 basis points (bps) at 4.12 percent. The two-year Schatz yield was steady at around 2.32 percent but well above Wednesday's eight-month lows of around 2.24 percent. Crude oil prices rose 30 cents to $31.12. Base metals dipped on profit taking and the stronger dollar, which also depressed safe-haven gold prices , down at $408/$408.75 from its New York close at $409.30.//