News Column

Dollar stays at lower 102 yen before BOJ policy meeting

June 11, 2014

Ryotaro Nakamaru

The U.S. dollar hovered in the lower 102 yen zone Wednesday in Tokyo as a wait-and-see mood prevailed ahead of the Bank of Japan's policy meeting from Thursday.

At 5 p.m., the dollar fetched 102.27-29 yen compared with 102.30-40 yen in New York and 102.24-25 yen in Tokyo at 5 p.m. Tuesday. It moved between 102.23 yen and 102.39 yen during the day, changing hands most frequently at 102.35 yen.

The euro was quoted at $1.3537-3538 and 138.45-49 yen against $1.3542-3552 and 138.59-69 yen in New York and $1.3591-3592 and 138.96-139.00 yen in Tokyo late Tuesday afternoon.

An overnight rise in U.S. Treasury yields failed to spark any buying of the dollar on expectations of widening interest rate gaps. The yield on the benchmark 10-year bond has been slow to bounce back from an 11-month low hit on May 29.

"It would have been a reason to buy the dollar if there was more upward momentum in the dollar-yen pair," said Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow, referring to the rise in U.S. yields.

"Even if you bet on the dollar now, there's no guarantee you'll be able to offload it at say, above 103 yen."

The BOJ is widely expected to hold off on announcing further monetary stimulus at its two-day meeting amid signs of an improvement in the Japanese economy.

Expectations for more easing waned after prices in Japan were shown to have surged 3.2 percent in April from a year earlier, said Shinichiro Kadota, foreign exchange strategist at Barclays Bank.

The BOJ estimates the recent 3-percentage-point consumption tax hike accounts for 1.7 percentage points of that gain, meaning prices are moving closer to the central bank's goal of 2 percent inflation.

"We've changed our previous outlook that the BOJ will ease in July to no further easing at all," Kadota said.

The euro on Wednesday slowed its downtrend against the dollar and the yen triggered by the European Central Bank's announcement last week of new easing measures including a negative deposit rate.

"The euro will continue on a gradual decline leading up to the start of the TLTROs in September and December," Kadota said, referring to targeted longer-term refinancing operations designed to provide eurozone banks with money to lend out.

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Source: Japan Economic Newswire

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