News Column

Dollar capped in upper 101 yen range on strong Japan CPI data

May 30, 2014

Ryotaro Nakamaru

The U.S. dollar was top-heavy in the upper 101 yen range Friday in Tokyo as data showed consumer prices in Japan rose in April at the fastest pace in over 23 years, denting expectations for further policy easing by the Japanese central bank.

At 5 p.m., the dollar fetched 101.63-64 yen compared with 101.74-84 yen in New York and 101.57-58 yen in Tokyo at 5 p.m. Thursday. It moved between 101.48 yen and 101.77 yen during the day, changing hands most frequently at 101.64 yen.

The euro was quoted at $1.3611-3612 and 138.33-37 yen against $1.3597-3607 and 138.40-50 yen in New York and $1.3592-3594 and 138.06-10 yen in Tokyo late Thursday afternoon.

The yen was bought for the dollar and the euro in the morning after data showed Japan's core nationwide consumer prices in April rose 3.2 percent from a year earlier following a consumption tax hike to 8 percent from 5 percent on April 1.

"It wasn't much higher than the market was expecting, but it also wasn't lower, which means there's no reason to think (the Bank of Japan) will implement additional easing," said Yuji Saito, executive director of foreign exchange at Credit Agricole Corporate & Investment Bank in Tokyo.

Monetary easing by a central bank generally causes its currency to weaken.

Low U.S. long-term interest rates continued to make the dollar less appealing after benchmark 10-year Treasury yields hit an 11-month low of 2.40 percent overnight.

"U.S. interest rates went (back) up some, but there are still factors that could bring them down such as the ECB, so there's still some hesitation" about buying the U.S. currency, said Toru Moritani, chief market economist at Sumitomo Mitsui Banking Corp., referring to the European Central Bank's policy meeting on June 5.

The ECB is widely expected to implement further monetary easing measures to drag the eurozone out of persistently low inflation.

Data due out later Friday on U.S. personal consumer expenditures, a key indicator of inflation, are likely to show an increase in April and could drive U.S. interest rates back up, Moritani said.

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Source: Japan Economic Newswire

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