Dollar bulls capitulate after Fed, BOJ meetings Higher oil also...

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    • Dollar bulls capitulate after Fed, BOJ meetings
    • Higher oil also hurts dollar
    • Yen hits 18-month high, euro up 0.4 percent
    • Worries over U.S. and global growth outlook growing
    • China PMI on Sunday should set tone for next week

    (Updates prices, adds comments)

    The yen built further on Friday on strong gains since a shocking Bank of Japan policy meeting, moving to an 18-month high against the dollar and on course for its biggest weekly gain since the 2008 financial crisis.

    Poor U.S. growth numbers and the Federal Reserve's cautious tone this week has squeezed hedge funds still backing a stronger dollar in the face of a market positioned negatively on the U.S. currency for the first time in a year.

    The yen's 3 percent rise after the BOJ meeting on Thursday added to the range of headwinds facing the greenback, which also include a steady recovery in oil prices over the past month.

    By 0726 GMT, the euro was up 0.25 percent against the greenback, helping push the dollar index a third of a percent lower. Sterling, relieved by an easing of Brexit nerves in the past two weeks, hit a 3-month high of $1.4658.

    The Canadian dollar, the major currency most correlated with crude prices, hit a 10-month high of C$1.2500.

    "If you were a dollar bull, you were holding on for some support from the Fed this week. When it didn't quite materialise, people just gave up," said Richard Benson, co-head of portfolio investment at currency managers Millennium Global.

    "If you ask me there is some significant nuance (taking us closer to a June hike) in what the Fed said. They maybe thought that statement would lead to people pricing it at 50-50 but the market just did not want to know."

    Some Japanese banks are sceptical on the yen's ability to gain further.

    But a year on from a German government bond sell-off that rocked markets, and with U.S. stocks at record highs and the U.S. economy showing signs of weakening, there are also some concerns that May could bring another global market wobble.

    That would tend to push capital towards the traditional security of Japan and the yen. After first quarter U.S. numbers showed almost no growth, much will depend on the strength of jobs numbers next Friday.

    Davis Hall, Head of FX and Precious Metals at Indosuez Wealth Management in Geneva, recommends buying dollars against the Swiss franc and the yen, arguing that the appeal of higher U.S. market interest rates should allow the market to turn soon.

    But he also says he is cautious about doing so before the Brexit vote and Fed and BOJ meetings in June.

    "Our house view is that this is really a nice opportunity to go out there and buy some dollars after this wobble. We would start with the Swiss franc and the yen first," he said.

    "But for the next 50 days, I would just be a little cautious. I'm still dollar-friendly but if we get a weak non-farm payrolls number next week ... I will be worried I have gone too soon."

 
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