News Column

Dollar trades in upper 101 yen zone on lower U.S. interest rates

May 28, 2014

Ryotaro Nakamaru

The U.S. dollar remained top-heavy in Tokyo on Wednesday and traded in a narrow range mostly in the upper 101 yen zone as a drop in U.S. interest rates counteracted buying cues such as strong U.S. economic data and solid performances in U.S. and Japanese stocks.

At 5 p.m., the dollar fetched 101.81-83 yen compared with 101.93-102.03 yen in New York and 101.76-77 yen in Tokyo at 5 p.m. Tuesday. It moved between 101.80 yen and 102.03 yen during the day, changing hands most frequently at 101.95 yen.

The euro was quoted at $1.3620-3621 and 138.67-71 yen against $1.3629-3639 and 139.00-10 yen in New York and $1.3646-3648 and 138.87-91 yen in Tokyo late Tuesday afternoon.

The dollar moved little in Tokyo, having drifted down from a two-week high of 102.14 yen overnight in New York on the back of bullish U.S. data including durable goods orders for April.

The yen was supported by lower U.S. long-term interest rates, said Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow, despite strong showings on Wall Street and the Nikkei stock index that usually lead market players to part with safe-haven assets.

The yen was also in demand as exporters sought to convert overseas profits into the Japanese currency before the end of the month, said Yuji Saito, executive director of foreign exchange at Credit Agricole Corporate & Investment Bank in Tokyo.

But the yen's grip on the dollar may start to loosen in June, dealers said.

"The market focus is now on (Prime Minister Shinzo Abe's) new plan for economic growth due out in June, with the market gradually leaning toward buying stocks and buying the dollar against the yen," Saito said.

The euro dropped slightly against the yen to reach its lowest level against the Japanese currency since early February amid persistent expectations of policy easing by the European Central Bank at its council meeting on June 5, dealers said.

ECB President Mario Draghi suggested earlier this month the central bank will implement additional easing at the meeting if it sees inflation rates in the eurozone as too low.

"The ECB is likely to lower interest rates as well as implement other easing measures, and the (market's) focus is on whether what it decides -- negative interest rates, (suspending) sterilization of its bond purchases (or other steps) -- will be effective," Ueda Harlow's Sakai said.

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Source: Japan Economic Newswire

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