News Column

Dollar rises to 102 yen range on firm stocks, Iraq woes cap topside

June 17, 2014

Mai Iida

The U.S. dollar edged higher to the 102 yen range in Tokyo on Tuesday, taking a cue from firmer Tokyo stocks, but its upside was capped amid concerns about escalating violence in Iraq and before the Federal Reserve's policy meeting.

At 5 p.m., the dollar fetched 102.03-04 yen compared with 101.79-89 yen in New York and 101.92-93 yen in Tokyo at 5 p.m. Monday. It moved between 101.82 yen and 102.07 yen during the day, changing hands most frequently at 101.93 yen.

The euro was quoted at $1.3560-3561 and 138.36-40 yen against $1.3569-3579 and 138.16-26 yen in New York and $1.3526-3527 and 137.86-90 yen in Tokyo late Monday afternoon.

After hovering narrowly at around 101.85 yen in the early morning, the dollar rose to top the 102 yen line once the Tokyo stock market opened higher. But the U.S. currency lost its upward momentum in the afternoon as Tokyo shares pared early gains.

The 225-issue Nikkei Stock Average finished the day 42.68 points, or 0.29 percent, higher from Monday at 14,975.97, giving up more than half of its early gains.

Stronger stocks tend to boost investors' risk tolerance and reduce demand for the perceived safety of the yen.

In addition to the Nikkei's rise, the dollar was also supported by solid buying from Japanese importers, said Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow.

"But as the crises in Iraq and Ukraine continue, the dollar is unlikely to keep rising sharply unless stocks advance at an explosive pace," he added.

Yuji Kameoka, chief foreign exchange strategist at Daiwa Securities Co., echoed Sakai's view, saying geopolitical risks in Iraq and Ukraine are the biggest factor behind the dollar's top-heaviness.

"Over the past week or so, there has been pressure from geopolitical risks, leading to a rise in oil prices, thereby weaker stocks and a higher yen," he said.

Traders were also reluctant to make bold bets before confirming the outcome of the Fed's two-day policy meeting starting later in the day, dealers said.

While it is widely expected the Fed will decide to scale down its asset-buying stimulus program further, investors will be looking for hints as to when the U.S. central bank will start raising interest rates, dealers said.

Fed chief Janet Yellen's press conference is scheduled for Wednesday.

For more stories on investments and markets, please see HispanicBusiness' Finance Channel

Source: Japan Economic Newswire

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