The dollar drifted lower against the yen with some investors cautious ahead of the final reading of first-quarter U.S. GDP data. It is forecast to be revised down and could boost expectations that the Federal Reserve is in no hurry to tighten policy.
Influential Federal Reserve policymaker, William Dudley, said on Tuesday the U.S. central bank could reasonably wait until mid-2015 to raise interest rates without risking an undesirable rise in inflation.
The dollar was down 0.1 percent versus the yen at 101.85 while the euro was up at $1.3615. The dollar index was slightly lower at 80.295, despite a rise in U.S. two-year Treasury yields which often supports the dollar.
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"Power is building up and dollar/yen is likely to move significantly in either direction if a break does occur," said Bart Wakabayashi, head of forex at State Street in Tokyo.
"Talk is that stop orders are building up steadily at 101.50 yen and 102.50 yen. Market players are currently trading within this narrow band to make a little change. Overall, the yen looks better bid unless the Bank of Japan comes up with its next easing plan."
Japanese CPI will be released on Friday and any fresh signs of the country escaping deflation are likely to further curb prospects for additional BOJ easing.