By James Ramage
The yen rose against the dollar, euro and British pound on
Thursday after an escalation of the conflict between Ukraine and
Russia sent investors scurrying into haven assets.
The dollar fell 0.2% versus the yen to Y103.66, while the euro
dropped 0.3% to Y136.67. The pound slid 0.2% to Y172.
Investors moved into the Japanese currency, U.S. Treasurys and
gold after Ukraine accused Russia of invading the country, renewing
concerns that the conflict could destabilize eastern Europe. The
worries about the stepped-up hostilities overrode the positive
effect of strong U.S. economic growth for the dollar.
"Geopolitics is diverting our attention away from the economic
data in the U.S.," said Vassili Serebriakov, currency strategist at
BNP Paribas. "Despite the fact that the numbers were all firmer
than expected, we're seeing downward pressure on U.S. yields, which
weighed on dollar-yen."
An updated estimate for second-quarter gross domestic product
showed the U.S. economy grew 4.2%, above forecasts for 3.8% growth.
In addition, weekly U.S. jobless claims fell by 1,000 to 298,000,
just below expectations of 300,000.
The news gave the dollar a small but temporary boost against the
yen and the euro.
The rush to buy Treasury bonds sent yields close to their lowest
point in more than a year, as bond prices and yields move
inversely. This pushed the dollar lower against its rivals, as
lower interest rates reduce investor returns on dollar-denominated
assets.
Still, the dollar would likely regain ground if the Ukrainian
conflict simmers down, Mr. Serebriakov said. The U.S. recovery
appears to be gaining momentum, an important factor for the Federal
Reserve's timeline for raising interest rates.
At the same time, inflation in the euro zone remains soft. The
euro bloc will see consumer price data Friday, which is expected to
show little change from recent numbers that have been well below
the European Central Bank's 2% target, pressuring the central bank
to introduce new easing measures at its policy meeting next
week.
The euro slipped 0.1% against the dollar Thursday, to
$1.3185.
-Write to James Ramage at james.ramage@wsj.com