LONDON: The dollar stayed near an 11-month high against the yen and a 1-month high against the euro on Thursday and looked set for further gains on growing optimism over the US economy and a rise in US Treasury yields.
The dollar and the euro fell versus the Swiss franc, however, after the Swiss National Bank maintained its 1.20 franc cap against the euro.
The dollar was down 0.4 percent against the yen to 83.28 yen, having hit 84.18 yen in Asian trade, its highest since April 2011. Stiff resistance was seen at the psychological 85 yen mark although strategists said there was an increasing chance it could rise beyond last year's high of 85.53 yen.
The euro also recovered slightly against the dollar after failing to break below $1.30, but analysts saw the recovery as temporary.
A broadly positive dollar outlook contrasted with other currencies, with the euro hampered by sovereign debt concerns, the yen by speculation the Bank of Japan may ease policy further and the Australian dollar by worries about Chinese growth.
"Euro/dollar has just taken a bit of a breather after coming down to the $1.30 area and is consolidating a little here. Breaking below $1.30 will be a bit of a task but the momentum is there," said Ian Stannard, currency strategist at Morgan Stanley.
The euro rose 0.2 percent against the greenback to $1.3056 as some market players took profit on long dollar positions, paring losses after hitting a one-month low of $1.3004. Traders reported hefty stop loss orders below $1.30.
Market players were focused on US data later in the day, including on jobs, inflation and manufacturing. Solid numbers were likely to reduce expectations of more monetary easing by the Federal Reserve and boost the greenback further.
"When we get good data the QE3 risk decreases and the main risk for the dollar decreases. Treasury yields are going up for the same reason," said Ulrich Leuchtmann, head of FX research at Commerzbank.
The dollar index was down 0.25 percent at 80.350, having earlier hit 80.738, its strongest since mid-January. A string of recent better US data, including robust non-farm payrolls and retail sales was followed by a slight upgrade in the Fed's growth outlook earlier this week, prompting a rise in US Treasury yields.
The two-year yield hit its highest since July 2011 , increasing the appeal of the US currency.
EURO/SWISS FLOOR UNCHANGED
The Swiss franc strengthened after the SNB announcement, recouping losses from Wednesday when it hit a one-month low against the euro and dollar.
Economists polled by Reuters had expected the SNB to keep the floor in euro/Swiss unchanged but there was some speculation it could be raised to 1.25 francs, prompting some markets players to take out long euro and short franc positions. Strategists said the franc's rise on Thursday was due to investors squaring those bets.
The euro hit a session low of 1.2085 francs on trading platform EBS after the decision, before paring losses to trade around 1.2097 francs, still down 0.25 percent on the day. The dollar also fell, touching a low of 0.9255 francs.
The SNB doubled its growth forecast for 2012 on Thursday and said it was determined to enforce its cap on the strong franc at 1.20 per euro because it was helping stabilise the economy.
"There was a slight change in tone regarding the Swiss franc ... They seem to be coming to terms with the fact that the franc is going to stay strong," Morgan Stanley's Stannard said. He expected the euro would hold in a range above 1.20 francs while the dollar would move higher versus the Swiss currency.
The Australian dollar recouped earlier losses to trade up 0.7 percent at $1.0526, having hit an eight-week low of $1.0422 as Chinese Premier Wen Jiabao doused hopes of relaxing control over the property sector.
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