News Column

Dollar idles at mid-101 yen in absence of clarity on Fed mood

July 10, 2014

Sophie Jackman

The U.S. dollar moved in a tight range in the mid-101 yen zone in top-heavy trading in Tokyo on Thursday as market participants remained guarded about the U.S. Federal Reserve's monetary policy outlook.

At 5 p.m., the dollar fetched 101.51-52 yen compared with compared with 101.60-70 yen in New York and 101.65-66 yen in Tokyo at 5 p.m. Wednesday. It moved between 101.46 yen and 101.62 yen during the day, changing hands most frequently at 101.54 yen.

The euro was quoted at $1.3634-3635 and 138.40-44 yen against $1.3637-3647 and 138.62-72 yen in New York and $1.3614-3615 and 138.39-43 yen in Tokyo late Wednesday afternoon.

The dollar traced the mid-101 yen line most of the day amid a lack of fresh incentives to buy, having ebbed slightly in the morning.

The early slip was likely influenced by Japan's weaker-than-expected May machinery orders data, but as the figure is known to fluctuate, its effect was limited, said Yuji Kameoka, chief foreign exchange strategist at Daiwa Securities Co.

In New York overnight, the release of the minutes from the Federal Open Market Committee's policy meeting in June had sent the dollar down to erase earlier gains as it lacked the hawkish hints some market participants were expecting.

But the effect of the minutes is likely temporary, said Yuji Saito, executive director of foreign exchange at Credit Agricole Corporate & Investment Bank in Tokyo.

The longer-term upward trend of the dollar against the yen is still in place as the Fed tapers its stimulus, while the Bank of Japan shows no sign of doing the same, Saito said.

The dollar should be top-heavy for the rest of the week as currencies across Asia strengthen in the wake of the U.S.-China Strategic and Economic Dialogue in Beijing through Thursday, Saito said.

"In the face of U.S. complaints about manipulating the yuan, China is likely to tone down its dollar-buying intervention, giving traders an incentive to buy up the yuan as well as other Asian currencies, and this should extend to the yen," he said.

The euro traded in a boxed range in Tokyo after a slight climb against the dollar and yen overnight.

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Source: Japan Economic Newswire

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