Yen retreats after weak Japan inflation data

The yen slipped on Friday as weak Japanese inflation data stirred talk of fresh easing measures, bringing an end to a short rally that had been fuelled by fears over unrest in Yemen.

In Tokyo the dollar rose to 119.29 yen from 119.18 yen in New York while the euro fetched 129.80 yen, against 129.71 yen.

The common currency was also at $1.0882 against $1.0884.

US traders on Thursday moved into the yen on news that jets from a Saudi-led coalition had targeted Shiite Huthi rebels in support of Yemen's president, who fled his presidential complex Wednesday after it was attacked by a warplane.

Iran condemned the Saudi-led action, which has exacerbated longstanding Saudi-Iranian tensions and raised fears over a wider Middle East conflagration.

Investors tend to buy the yen as a safe-haven during times of uncertainty and turmoil.

But the unit slipped back as official data showed that Japanese inflation stalled in February with a key measure of prices flat for the first time in nearly two years.

The disappointing figures deal a blow to the Bank of Japan's efforts to conquer deflation, and raise the possibility of more monetary easing later this year just as the US Federal Reserve eyes an interest rate hike.

"It's clear that Japan will maintain its accommodative monetary policy and tapering is not in sight while it's also clear that the US is just about the only place where interest rates will rise," Yunosuke Ikeda, head of currency strategy in Tokyo at Nomura Securities, told Bloomberg News.

"There is no change to the basic scenario of a strong dollar."

Also benefitting the greenback, new claims for US unemployment insurance benefits fell last week, continuing to trend lower as the labour market improves in a sign of a broader recovery for the world's top economy.

Investors will be keeping a close eye on a speech by Fed chief Janet Yellen later in the day to see if she offers up any clues about the timing of a long-awaited rate hike.