* Dollar/yen eases, on track for 0.7 pct weekly loss
* Weak US data further reduce US rate hike prospects
* Focus on BOJ and Fed policy meetings on Sept 20-21
* Sterling down half a percent
(Updates prices, adds comments)
By Patrick Graham
LONDON, Sept 16 The dollar was on course to fall
for a second week against the yen on Friday after U.S. retail
sales data quelled lingering bets on the Federal Reserve raising
interest rates next week, while faith in Bank of Japan action
against its currency also seems limited.
The past week has been dominated by a rethink on debt
markets about the outlook for central bank policy in Europe and
Japan. One currency leg of that looks to be the growing lack of
belief that officials can do much to weaken either the euro or
yen if the U.S. Federal Reserve does not raise interest rates.
The yen gained 0.2 percent to 101.84 per dollar, putting it
up 0.7 percent for the week. Helped by a small gain against the
euro and a half percent fall in sterling, the dollar index which
measures its broader strength was just up at 95.483.
"The Fed is looming in about five days. Until then we doubt
that the dollar is going to swing either way," said Alexandre
Dolci, a strategist at Spanish bank BBVA in London.
"If anything we may see more about the yen and this is what
the option market is pricing in. Given that the BoJ has had a
good track record for disappointing the market since the start
of the year, the risk is the yen could strengthen a little bit
against the other majors."
He said his bank had a target of 108 yen per dollar for the
end of the year, predicated on the Fed raising interest rates in
December, although that seemed subject to risks from November's
U.S. presidential elections.
"Explicitly they can't say anything (about Trump)," he said.
"But we think they would want to see further the reaction of the
market to figure out what to do on interest rates (if he wins)."
The Fed and the Bank of Japan both issue their decisions on
interest rates and other policy parameters next Wednesday.
Bank of England policymaker Kristin Forbes focussed on the
positive fallout of a drop in the pound since Britain's vote in
June to leave the European Union, pointing to the positive
impact on Britain's large current account deficit.
After three solid weeks of gains, sterling was down 0.6
percent on the day against the dollar on the day and 0.7 percent
on the week.
"We still like the view of a weaker pound," said Citi
strategist Josh O'Byrne.
"The Bank of England was slightly more dovish than the
market thought they could be (yesterday). They highlighted the
positive surprise on the data. But really the guidance (on their
willingness to ease policy further) was more or less unchanged."
Financial markets are pricing in a roughly 12-percent
probability of a Fed rate hike next week, down from 15 percent
before the data, according to the CME FedWatch tool.
The BOJ is due to conduct a comprehensive review of its
current policy framework that combines negative interest rates
with a massive asset-buying programme.
Many market players expect it to indicate a preference for a
steeper yield curve to cushion the blow on banks from negative
interest rates, but there is also focus on whether the central
bank will cut rates deeper into negative territory.
"I think the market has somewhat priced in a (rate) cut as
well as a tweak to the QE programme," said Sim Moh Siong, FX
strategist for Bank of Singapore. "If the BOJ stays put, then I
would expect the yen to come under some appreciation pressure,
especially if the Fed stays put as well."
(Additional reporting by Shinichi Saoshiro in Tokyo; Editing by