News Column

Dollar sags to 1-month low in lower 101 yen on weak U.S. data

June 27, 2014

Mai Iida

The U.S. dollar sagged to a one-month low in the lower 101 yen range Friday in Tokyo as disappointing U.S. spending data reinforced a market view that the Federal Reserve should be in no hurry to raise interest rates.

At 5 p.m., the dollar fetched 101.42-43 yen, compared with 101.67-77 yen in New York and 101.78-80 yen in Tokyo at 5 p.m. Thursday. It briefly hit 101.32 yen, its lowest level since late May in Tokyo, while touching its day's high of 101.77 yen and changing hands most frequently at 101.51 yen.

The euro was quoted at $1.3619-3621 and 138.13-17 yen against $1.3608-3618 and 138.38-48 yen in New York and $1.3623-3625 and 138.66-70 yen in Tokyo late Thursday afternoon.

After being confined in a narrow range near the 102 yen line over the past few weeks, the dollar broke out of the recent range-bound trading and dipped into the lower 101 yen zone in the wake of downbeat U.S. spending data, which came a day after a bigger-than-expected downward revision to U.S. gross domestic product data for the January to March quarter.

The dollar-selling accelerated in the afternoon as Tokyo shares' declines widened. Weaker stocks tend to encourage risk-aversion and boost demand for the perceived safety of the yen.

The U.S. Commerce Department said Thursday that personal consumption expenditures increased 0.2 percent in May from the previous month, undershooting market expectations of a 0.4 percent rise.

In another negative report, the U.S. Labor Department said new applications for state unemployment benefits fell a smaller-than-expected 2,000 to a seasonally adjusted 312,000 in the previous week.

"Given the sharp downward revision to the U.S. GDP, there had been some hope we might see a good reading for the second quarter in the wake of the early fall. But the latest data dashed such hope," Toru Moritani, chief market economist at Sumitomo Mitsui Banking Corp., said, referring to the spending data.

"At least, U.S. Treasury yields are unlikely to rise so easily," he said.

On the domestic front, the Japanese government said in the morning that the nation's consumer prices rose 3.4 percent in May from a year earlier, the biggest increase in more than three decades, driven mainly by rising energy costs following the April consumption tax hike.

But the dollar-yen pair showed muted reaction to the data as it was within market expectations.

The price data did little to change market views on the possibility about an additional easing by the Bank of Japan, said Toshiyuki Suzuki, senior market economist at the Bank of Tokyo-Mitsubishi UFJ.

"Expectations about additional easing appear to have already diminished very much," he said. "Such a market view is unlikely to change before confirming economic situations in the July-September quarter, as well as effects of the government's new growth strategy, and political situations," he said.

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Source: Japan Economic Newswire

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