News Column

Dollar drops to upper 101 yen zone on Iraq fighting, weak Tokyo stocks

June 16, 2014

Mai Iida

The U.S. dollar fell to the upper 101 yen zone in Tokyo on Monday as risk aversion amid the deepening instability in Iraq and a decline in Tokyo shares drove traders to the perceived safety of the yen.

At 5 p.m., the dollar fetched 101.92-93 yen compared with 102.00-102.10 yen in New York and 101.82-83 yen in Tokyo at 5 p.m. Friday. It moved between 101.72 yen and 102.04 yen during the day, changing hands most frequently at 101.95 yen.

The euro was quoted at $1.3526-3527 and 137.86-90 yen against $1.3533-3543 and 138.01-11 yen in New York and $1.3574-3575 and 138.21-25 yen in Tokyo late Friday afternoon.

Concern about Iraq has grown since local media reported that Sunni insurgents seized the city of Tal Afar, northern Iraq, on Sunday, dealers said.

In addition to the crisis in Ukraine, financial markets were reeling from the escalating violence in Iraq, said Yuji Saito, executive director of foreign exchange at Credit Agricole Corporate & Investment Bank.

"Risky areas have broadened. It's difficult not to become risk-off in this situation," he said.

A fall in Tokyo shares also made investors reluctant to take risks, pushing them toward the safe-haven yen, dealers said.

The 225-issue Nikkei Stock Average tumbled 164.55 points, or 1.09 percent, from Friday to 14,933.29, its lowest finish in about two weeks.

The dollar's decline to the 101 yen zone in Tokyo came after it gained ground on Friday in New York. The euro also slipped into the 137 yen range in Tokyo.

But trading was relatively slow as market players refrained from making bold bets before the Federal Reserve's two-day policy meeting starting Tuesday, dealers said.

It is widely expected that the Fed will decide to further slow the pace of its stimulus spending and market players will be looking for hints as to when the Fed will start raising interest rates, said Shinichiro Kadota, foreign exchange strategist at Barclays Bank.

"We've seen not only falls in the (U.S.) unemployment rate but also pickups in prices recently. How the Fed will take into account these factors will be the biggest point to watch," he said.

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Source: Japan Economic Newswire

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