News Column

Dollar stays weak in upper 101 yen in morning as dovish Fed disappoints

June 18, 2014

The U.S. dollar stayed weak in the upper 101 yen level in Tokyo on Thursday morning as market players' expectations of an interest rate hike was dampened by the U.S. Federal Reserve taking a more dovish stance than expected.

At noon, the dollar fetched 101.94-96 yen compared with 101.87-97 yen in New York and 102.22-24 yen in Tokyo at 5 p.m. Wednesday.

The euro was quoted at $1.3592-3592 and 138.57-58 yen against $1.3591-3601 and 138.52-62 yen in New York and $1.3547-3548 and 138.48-52 yen in Tokyo late Wednesday afternoon.

Taking a cue from the dollar's bearish tone against the yen in New York overnight, market players in Tokyo refrained from buying the dollar against the yen as the Fed's policy unveiled on Wednesday disappointed many players who hoped for a hawkish Fed stance, dealers said.

"There were expectations of an early interest rate hike but such expectations receded after the Fed said it will keep its short-term interest rate at zero and maintained its inflation outlook," said Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow.

Fed chief Janet Yellen did not give the timing of the interest rate hike.

At a press conference after a policy-setting meeting of the Federal Open Market Committee, she said the committee will discuss how to normalize the monetary policy by finishing the asset purchases and ultralow interest rate policy "with the expectation of providing additional details later this year."

The dollar's upside was also capped by speculation over narrower interest rate gaps between Japan and the United States following a fall in U.S. long-term interest rates after the Fed cut the 2014 outlook for U.S. economic growth, dealers said.

Continued instability in Iraq also kept the U.S. currency from rising, Sakai said, pointing to geopolitical risks which often push market players to flee to the safe-haven yen.

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Source: Japan Economic Newswire