Dollar Strongly Bid Due to Fed View and Economic Resilience; Yen Sees Weekly Gain

SINGAPORE, April 16 (Reuters) - The dollar was on the offensive on Friday, as strong US economic statistics underscored the need for the Federal Reserve to maintain its aggressive monetary policy tightening course, raising the prospect of higher-for-longer rates.

The dollar strengthened widely overnight but was hampered by the Japanese yen, which has continued to garner strong demand after the Bank of Japan's unexpected policy change earlier this week.

Sterling was slightly higher at $1.2038 after falling to a three-week bottom of $1.1993 overnight.

The euro rose 0.01% to $1.0601, with the single currency under pressure lately as a result of a mix of sluggish eurozone growth, the Ukraine crisis, and the Fed's aggressive policy stance.

According to statistics published on Thursday, the number of Americans submitting new claims for unemployment benefits climbed less than anticipated last week, indicating that the job market remains tight.

On the same day, a second study revealed that the US economy recovered in the third quarter after declining in the first half of the year, and at a higher rate than previously expected.

“The market is still bouncing around on speculation about what the Fed will do next,” said Jarrod Kerr, chief economist at Kiwibank.

“The market is in an unusual situation right now, trying to figure out when the last rate rise was and at what level.”

The US dollar index was 104.35 against a basket of currencies.

Surprise for Boj

On Friday, the yen was a little down at 132.39 per dollar, but it remained on course for its third-largest weekly rise of more than 3% this year.

The Bank of Japan's surprising announcement on Tuesday to allow the 10-year bond yield to fluctuate 50 basis points on either side of its 0% objective, rather than the prior 25 basis point range, has offered considerable support for the yen, which had been plunging. The central bank's action has heightened market views that it is a forerunner to the complete abandoning of its yield curve management strategy.

According to data published on Friday, Japan's core consumer inflation touched a new 40-year high of 3.7% in November, as businesses continued to pass on growing costs to consumers.

“From now on, Japan's inflation data will be keenly monitored,” Carol Kong, a currency analyst at the Commonwealth Bank of Australia, said.

“Japan's inflation trends have obviously improved significantly over the last several months, and I believe markets are increasingly anticipating additional movements from the Bank of Japan.”

The minutes of the BOJ's October policy meeting, published on Friday, revealed that several policymakers emphasized the need of considering how a potential departure from ultra-low interest rates may influence markets and mortgage rates for families.

The Australian dollar was 0.09% higher at $0.6675 in other currencies, after losing 0.6% overnight. The kiwi sank 0.7% overnight, reaching a three-week low of $0.6231. It was recently down 0.03% at $0.6246.

In other Asian currencies, the Chinese offshore yuan climbed marginally to 7.0038 per dollar.

Russia will begin purchasing yuan on the currency market next year if oil and gas earnings exceed expectations, according to two sources, creating a new front in the country's increasing de-dollarization campaign to lessen its reliance on Western financing.

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