LONDON (Reuters) - The dollar rose against most major currencies on Friday, retreating from a one-year low hit against the euro the previous day as investors covered short positions after the greenback's sharp slide and softer equities cooled risk appetite.
The dollar has retreated broadly since March as investors shift into riskier assets due to increasing signs that the global economy is on the mend, and it extended its losses this week as equities and commodities rallied.
The battered U.S. currency gained some reprieve on Friday as investors trimmed their positions ahead of holidays in Japan and Singapore next week, although the trend for broad dollar weakness was seen as likely to persist.
"We've obviously had a fairly big move. There's not in much in terms of news or catalyst to drive the market further," said Derek Halpenny, European head of currency research in London. "Asian equities are mostly down on the day modestly, U.S. stock futures are slightly lower. It's just time for a period of consolidation after some big moves."
The euro dipped 0.3 percent from late U.S. trading on Thursday to $1.4694.
The euro, which hit a one-year high of $1.4768 on trading platform EBS on Thursday, has risen about 2.8 percent in the past two weeks.
Data showing German August producer prices rose by 0.5 percent month-on-month, beating forecasts for a 0.2 percent rise, had little effect on the market.
European shares slipped from an 11-month peak hit the previous session as recent sharp gains prompted investors to book profits.
DOLLAR WEAKNESS INTACT
Some in the market expect the dollar to remain under pressure given lower financing costs and fueled speculation the greenback is fast becoming the preferred funding currency for carry trades.
"The (U.S.) three-month Libor rates are now cheaper than in the euro zone, Switzerland or Japan. The dollar has thus become a financing currency for carry trades, which currently constitute an attractive investment strategy," Commerzbank strategists said in a note.
"In a situation such as this, positive economic data only ever provides short term support for the dollar. This situation is unlikely to change until there are signs that the Fed might raise rates. In an environment such as this the 1.50 mark seems the next logical target in EUR-USD."
The dollar index, which measures the dollar's value against a basket of six major currencies, rose 0.35 percent to 76.457 .DXY, having bounced off Thursday's one-year low of 76.010.
For now, the dollar is edging higher on short-covering, said Hoshino at Bank of Tokyo-Mitsubishi UFJ.
"There is some position adjustment taking place, with Asian players facing a long weekend," Hoshino added.
