The U.S. dollar held up against the Japanese yen in Asian trading Friday, as surprisingly positive data about Japan's economy failed to erase growing bullish sentiments about the U.S. currency.
The U.S. dollar was trading at 108.65 yen in Tokyo by midafternoon, up 0.41 yen from late Thursday and above the 108.60 yen it bought in New York later that day. The euro fell to US$1.2822 from US$1.2936 late Thursday and to 139.34 yen from 139.90 yen.
The dollar was mostly higher against other regional currencies, edging up to 1,014.6 South Korean won from 1,012.5 the previous day, but slipping to 9,496 Indonesian rupiah from 9,505. It rose to 39.640 Thai baht from 39.630.
A larger-than-expected rise in Japanese machinery orders in government data released Friday failed to put a dent in bullish market sentiment for the U.S. currency.
The dollar also extended its gains against the euro after the European Central Bank signaled it's unlikely to raise interest rates soon. The European currency's weakness against the dollar also pulled it lower against the yen in Asian trading.
Japanese core machinery orders, a leading indicator of capital expenditure, rose 4.9 percent in February from the previous month. That compares with an average forecast for a 3.1 percent rise made by economists surveyed by Dow Jones Newswires.
Pessimism about the Japanese economy, reflected in other data such as the Bank of Japan quarterly survey of business sentiment called "tankan," had helped the dollar rise in recent weeks.
But the strong increase in machinery orders wasn't enough to sway market players toward dollar-selling, traders said.
"I'm sure economists will sift through this data, but I don't think it can overcome negative sentiment for the yen after the tankan survey," said Shogo Nagaya, foreign exchange manager at Nomura Securities.
The dollar has risen recently on expectations the U.S. Federal Reserve will continue to raise interest rates this year. Expectations of higher U.S. rates tend to make securities denominated in dollars more attractive.
The dollar's rally was also strengthened by a surprise warning about inflation from the Federal Reserve on March 22. The Fed's hawkish tone led many players to believe that U.S. interest rates will rise more quickly.
Since the Fed meeting, the dollar has made some adjustments but such dollar-selling appears to have been limited.
It's unclear how long the dollar's rally will last. The dollar languished last year, hurt by deep worries about the massive U.S. trade and budget deficits. Next week, the United States will release trade data, and that may push the dollar back down.
Takeshi Iba, foreign exchange trader at Calyon, said the strong machinery-orders numbers aren't going to force the dollar down immediately.
"This data set is very volatile and may seem stronger than the consensus, but one strong figure cannot change the current trend," he said.