US dollar eases on US poor Q1 growth data

THE US dollar has slipped back against the euro, after a weaker-than-expected US first quarter growth estimate and as fears eased of military escalation over Syria's alleged use of chemical weapons.

Meanwhile, the yen pushed higher after the Bank of Japan held steady on its stimulus program and said economic growth was pulling out of stagnation.

The euro edged higher to $US1.3029 at 2100 GMT on Friday (0700 AEST Saturday) from $US1.3009 late on Thursday GMT.

The US dollar fell to Y97.99 from Y99.29, while the euro dropped to Y127.76 from Y129.16.

The euro had fallen on Thursday on worries that Washington's acknowledgment of possible chemical weapons use by the Damascus regime would lead to US military intervention in the conflict.

But US President Barack Obama slowed the pace of escalation on Friday by promising a "vigorous investigation" into the allegations.

Meanwhile, US growth for the January-March quarter came in at 2.5 per cent, a solid rebound from the previous quarter but slower than many economists had predicted.

That firmed expectations that the Federal Reserve was not likely to tighten monetary policy in the near future, as government spending cuts and higher payroll taxes continue to restrain growth.

Even so, traders are now waiting to see what hints come from the Fed's two-day policy board meeting beginning on Tuesday, said David Song of DailyFX.

"We may see a greater argument to scale back on quantitative easing as the US economy gets on a more sustainable path," Song said.

"Indeed, the central bank may adopt a more neutral to hawkish tone for monetary policy as the recovery gradually gathers pace."

In Japan, the central bank held off announcing any new policy measures after its first meeting since unveiling a huge stimulus package this month.

The Bank of Japan said its policy board was unanimous in voting to stay put for the moment, while it separately forecast 2.9 per cent growth for the fiscal year to March 2014, predicting inflation to pick up to 0.7 per cent.

But current figures showed the challenge of deflation remains: Friday data for March showed core consumer prices, which excluded volatile food prices, fell 0.5 per cent on-year.

Meanwhile the British pound continued to gain on fresh optimism for economic growth, reaching $US1.5474 from $US1.5430 late Thursday.

And the US dollar edged lower against the Swiss franc, moving to 0.9425 francs from 0.9448 francs.

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