By Hideyuki Sano
TOKYO (Reuters) - The dollar held firm on Friday, supported by comments from a Federal Reserve speaker that suggested a U.S. interest rate increase this year is still a real possibility as inflation pressures grow.
U.S. retails sales data and a series of Chinese economic indicators due later in the day will be the market's next major focus points, although trading could be slow with many market participants in Japan on leave this week for the summer holidays.
The dollar's index against a basket of six major currencies rose to 95.906 from this week's low of 95.442 touched on Wednesday, although it looks likely to end the week lower, having lost 0.3 percent so far.
"The dollar appears to be on a much more solid footing than when markets were worried about the impact of Brexit. It may take time a bit but its direction is clearly looking upwards," said Koji Fukaya, CEO of FPG Securities.
Against the yen, the dollar firmed to 101.83 yen from this week's low near 101 yen, though it was flat on the week so far.
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The euro eased to $1.1139 after having risen to $1.1192 on Thursday.
San Francisco Fed President John Williams told the Washington Post on Thursday that the U.S. central bank should raise rates this year because of improving labour market conditions and the likelihood that inflation is heading higher.
Although a strong reading on U.S. payrolls data last Friday boosted optimism about the U.S. economy, many investors are still far from convinced the Fed can raise interest rates because of an uncertain global economic outlook.
Concerns about a slowing Chinese economy are one of the major issues currently on investors' minds, given that China has been the biggest contributor to global growth for a long time.
Data due later in the day is expected to show a slowdown is continuing in retail sales, fixed investment and industrial output.
In the U.S, retail sales data on Friday is expected to show a 0.4 percent monthly increase in July, according to the median estimate of 64 economists polled by Reuters.
But traders also say the currency could stay in a range before Fed Chair Janet Yellen makes a speech at the Federal Reserve's Jackson Hole symposium on Aug. 26.
The British pound dropped to a one-month low of $1.2936 as more signs of weakness in the housing market fanned worries about the UK economy post-Brexit. Sterling last stood at $1.2987.
The pound also fell to near its three-year low hit against the euro last month.
The euro rose to as high as 86.24 pence, just below its July peak of 86.29 pence on Thursday and last fetched 85.96.
The New Zealand dollar stood at $0.7214, off its 15-month high of $0.7351 set on Thursday when a rate cut by the Reserve Bank of New Zealand was deemed as falling short of market players' expectations.
(Editing by Sam Holmes)