dollar ticked up slightly on Friday

TOKYO, Aug 14 (Reuters) – The dollar ticked up slightly on Friday after China’s central bank appeared to have stopped guiding the yuan lower for now, easing concerns that a weaker Chinese currency could derail plans by the U.S. Federal Reserve to raise interest rates.

The dollar traded at 124.50 yen, up slightly from late U.S. levels and extending its recovery from this week’s low of 124.21 yen. For the week, it is up 0.2 percent.

The euro fetched $1.1141, down slightly from late U.S. levels. Still, it was up 1.6 percent on the week, as the dollar has been hit by speculation that the U.S. too may not want a strong dollar if China pushes down the yuan.

On Friday, the People’s Bank of China set the yuan midpoint at 6.3990 yuan to the dollar, slightly stronger than Thursday’s levels.

The central bank said on Thursday there was no reason for the yuan to fall further given the country’s strong economic fundamentals.

Beijing’s moves eased concerns a cheaper yuan could trigger a “currency war”, or a competition among the world’s biggest economies to cheapen their own currencies to seek a competitive edge.

U.S. interest rate futures prices edged down and U.S. bond yields bounced back as investors repriced higher chances of a Fed rate hike in September. Solid U.S. retail sales data also supported the case for an early rate hike.

The dollar’s index against a basket of six major currencies stood at 96.372 , off its one-month low of 95.926 hit on Tuesday.

Still, market players are not sure how much more the dollar can gain, assuming the yuan could fall further in future given a slowdown in the Chinese economy.

“The latest concerns triggered by the sudden policy action may be subsiding a tad. But there is no change in the fact that the Chinese economy is slowing,” said Masafumi Yamamoto, senior strategist at Monex Securities.

“I think the yuan has become overvalued as other countries tried to cheapen their currencies and it will keep falling, playing catch-up,” he added.

While most major currencies saw limited moves, the New Zealand dollar fell after domestic retail sales had the slowest increase in two years, cementing expectations its central bank will cut rates.

The New Zealand dollar traded down 0.5 percent at $0.6540 .

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