TOKYO: The dollar drifted lower in Asia on Friday as weak inflation figures and disappointing US corporate results dampened investor sentiment, while the euro was also under pressure on deflation fears.
The greenback bought 104.34 yen in afternoon Tokyo trade, down from 104.37 yen in New York Thursday, and after a Japanese government report described Asia's number-two economy as "recovering" for the first time in six years.
The euro weakened to 142.08 yen from 142.11 yen while it fetched $1.3614 compared with $1.3615 in US trade.
"It seems that the market is still finding its feet after the turn of year despite data in general pointing to positive growth momentum," Credit Agricole said.
"While we are of the view that market sentiment will remain healthy in the next months and quarters, evidently this is far from a one way bet," it added.
On Thursday, the US Department of Labor said weekly unemployment claims fell 2,000 last week, indicating the jobs market is recovering slowly.
The department also said consumer prices rose 0.3 percent in December from November, and core prices -- stripping out volatile energy and food prices -- were up just 0.1 percent. The yearly rate was 1.5 percent and the core rate 1.7 percent, below the Federal Reserve's 2.0 percent target.
Wall Street was spooked by poor earnings from a number of big firms. Electronics retailer Best Buy plunged 28.6 percent after saying November-December same-store sales were lower than the previous year's holiday season.
Citigroup also took a hit with below-forecast earnings while chip giant Intel sank in after-market trade as it said net profit last year fell 13 percent
However, the dollar won a measure of support from a stronger-than-expected rise in the Philadelphia Fed's index of manufacturing activity.
Investors will be eyeing a string of US data later in the day, including December housing starts, industrial production and consumer confidence.
Forex markets are keeping a close eye on US economic data for signs of a further pickup that could give the Fed ammunition to further cut its stimulus programme at a policy meeting this month.
In December, the bank said it would reduce its bond-buying by $10 billion to $75 billion in January. A reduction of the stimulus is a positive for the dollar as it means there is less cash in the financial system.
The euro weakened after figures Thursday showed eurozone inflation slipped to 0.8 percent in December from 0.9 percent in November, adding to concerns that falling prices could undermine growth prospects.
"Such a low (inflation) level is a matter of concern," Credit Agricole said.
"We stick to the notion that the (European Central Bank) is likely to consider additional policy action should inflation continue to fall."
The greenback was mixed against other Asia-Pacific currencies.
It weakened to Sg$1.2724 from Sg$1.2737 on Thursday, to 1,061.19 South Korean won from 1,063.70 won, to Tw$30.07 from Tw$30.09 and to 61.41 Indian rupees from 61.62 rupees.
It also declined to 32.74 Thai baht from 32.90 baht while it rose to 45.08 Philippine pesos from 45.06 pesos and to 12,124 Indonesian rupiah from 12,120 rupiah.
The Australian dollar rebounded to 88.18 US cents from 87.96 cents, a three-year low, while the Chinese yuan was at 17.23 yen against 17.28 yen.
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