TOKYO The dollar sagged early on Friday after lacklustre U.S. economic data further reduced already-low expectations for a Federal Reserve interest rate hike next week, while higher commodity prices buoyed the Australian and Canadian dollars.
The euro inched up 0.1 percent to $1.1248, en route to eke out a 0.1 percent weekly gain.
Movements in currencies were confined to a relatively narrow range this week with a wait-and-see mood prevailing ahead of the Sept. 20-21 Fed and Bank of Japan policy meetings.
The dollar was down 0.1 percent at 101.935 yen after losing 0.3 percent overnight. It was on track to drop about 0.8 percent this week, with the Japanese yen finding favour in the latest bout of global risk aversion.
The greenback slipped after data issued on Thursday showed U.S. retail sales fell more than expected in August amid weak purchases of automobiles and a range of other goods.
Financial markets are pricing in a roughly 12 percent probability of a rate hike next week, down from 15 percent before the data, according to the CME FedWatch tool.
"While the dollar/yen will keep an eye on Japanese government bond yields and equities, it is likely to be range bound around 102 yen before the BOJ policy meeting," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.
"But there is the risk of the market reacting to speculative reports on the Fed and BOJ during the media blackout period before the policy meetings."
Elsewhere, the Australian dollar was steady at $0.7513 after posting a 0.7 percent gain on Thursday.
The Aussie, sensitive to shifts in broader risk sentiment, hit a seven-week low of $0.7443 earlier this week. But the commodity-linked currency has pulled back thanks to sizeable gains in prices of commodities such as copper and crude oil following a rough patch earlier this week.
The Canadian dollar was steady at C$1.3161 to the dollar. The loonie retreated to a seven-week low of C$1.3236 earlier on Thursday before reversing course to end the day modestly higher.
(Reporting by Shinichi Saoshiro; Editing by Eric Meijer)