Investing.com -- EUR/USD rose moderately on Friday bouncing from one-month lows, as currency traders continued to digest hawkish signals from the Federal Reserve that it appears ready to lift interest rates for the first time this since their historic rate hike in December.
The currency pair traded between 1.1197 and 1.1237 before settling at 1.1223, up 0.0021 or 0.18% on the session. With the slight gains, the euro halted a three-day losing streak while closing higher for only the fourth time for the month of May. Since eclipsing 1.16 to hit an eight-month high at the start of the month, the euro has fallen more than 2.5% against the dollar. More broadly, the euro is still up by nearly 4% against its American counterpart year to date.
EUR/USD likely gained support at 1.0538, the low from December 3 and was met with resistance at 1.1713, the high from Aug. 24.
As the dollar took a breather on Friday, investors looked ahead to a highly-anticipated bilateral meeting between U.S. Treasury secretary Jack Lew and Japan finance minister Taro Aso over the weekend at the Group of Seven finance leaders' summit in Japan. On Friday, a host of prominent finance ministers at the meeting reiterated the importance of abstaining from currency manipulation, amid widespread concern that Japan could engage in possible actions to devalue the yen in an effort to bolster imports and provide a boost to equities on the Nikkei 225. While expressing discontent with recent moves by the Japanese government to intervene in global foreign exchange markets, Aso reaffirmed on Friday that it is committed to "avoiding competitive currency devaluation."
Last month, Lew sent explicit warnings to China, Germany and Japan to not take part in competitive currency devaluation, whether through Quantitative Easing or interest rate moves. At Friday's summit, Lew told reporters that top foreign officials made progress at February's G20 meeting in Shanghai due to a "re-commitment" by participants to refrain from such currency manipulations.
Market players also continued to digest broad signals from the Federal Open Market Committee (FOMC) that it will raise short-term interest rates at a two-day meeting next month if the domestic economy shows improvement over the next few weeks. Earlier this week, several FOMC policymakers indicated that the committee could lift rates more than once before the end of the year, if global financial risk continues to recede and inflation firms. The FOMC has left its benchmark Federal Funds Rate at the current range between 0.25 and 0.50% at each of its three meetings this year. In December, the FOMC abandoned a seven-year zero interest rate policy by raising the Fed Funds Rate 25 basis points.
On Friday afternoon, the U.S. Commodities Futures Trading Commission (CFTC) said in its weekly Commitment of Traders report that short positions in the EUR/USD rose by 1,000 last week to 23,000, while long positions in the yen remained unchanged at 59,000. The largest change occurred in the AUD/USD, where long positions fell by 13,000 to 25,000. Overall, speculators cut their short wagers in the U.S. dollar for the second straight week from a total value of $6.19 billion to $4.19, according to calculations from Reuters.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, gained more than 0.10% to an intraday high of 95.46 before closing at 95.29. Although the dollar closed higher for the fourth straight week, the index is still down more than 4% since early-December.