Dollar lower on profit-taking, all eyes turn to next week's FOMC meeting

The dollar edged mostly lower on Friday, as investors locked in profits after the U.S. currency rallied to three-week highs after upbeat U.S. data. The possibility of additional easing measures in the euro zone also lent support to the greenback.

USD/JPY was steady at 120.65, down 0.04%, after rising to a one-month peak of 120.99 overnight.

The U.S. Department of Labor reported on Thursday that the number of individuals filing for initial jobless benefits in the week ending October 17 increased by 3,000 to 259,000 from the previous week’s total of 256,000. Analysts had expected jobless claims to rise by 9,000 to 265,000. It was the 33rd straight week that claims were below the 300,000 threshold, which is normally associated with a firming jobs market.

In a separate report, the U.S. National Association of Realtors said that existing home sales rose by 4.7% to 5.55 million units last month from 5.30 million in August. Economists had expected existing home sales to climb 1.4% to 5.38 million units in September.

GBP/USD climbed 0.03% to trade at 1.5398.

EUR/USD was last trading at 1.1119, up 0.13%.

The euro was slightly higher against the pound, with EUR/GBP up 0.06% at 0.7220.

The shared currency was hurt after ECB head Mario Draghi said the regulator will "reexamine" its monetary policy in December, hinting at the possibility for further easing measures.

At the ECB's monthly press conference in Malta, Mr. Draghi added that the ECB's quantitative easing program is set to run until 2016 or beyond if necessary.

Mr. Draghi also said that downside risks have emerged for growth and the inflation outlook in the eurozone. The remarks came shortly after the ECB said it was maintaining its benchmark interest rate at a record-low 0.05%, in line with market expectations.

The ECB’s stance set off speculation the Bank of Japan, which is scheduled to hold a policy-setting meeting Oct. 30, could also launch extra monetary easing, a move vulnerable to the yen selling.

Ayako Sera, head of the research team at Sumitomo Mitsui Trust Bank, said that speculation about BoJ easing will likely occur.

But “investors are now taking a cautious stance,” as they refrain from taking lopsided position ahead of the Federal Open Market Committee meeting scheduled for Oct. 27-28.

“I think investors will be paying a greater attention if the FOMC is really serious about raising rates in December,” she said, adding that the FOMC “really needs to re-establish a trust relationship with the financial market.”