News Column

Dollar lingers in lower 101 yen amid unease over European banks

July 11, 2014

Sophie Jackman

The U.S. dollar held steady in the lower 101 yen zone in Tokyo on Friday, with global risk sentiment dented by unease over European banks and low U.S. Treasury bond yields offering little incentive to buy the dollar.

At 5 p.m., the dollar fetched 101.36-37 yen compared with 101.29-39 yen in New York and 101.51-52 yen in Tokyo at 5 p.m. Thursday. It moved between 101.22 yen and 101.39 yen during the day, changing hands most frequently at 101.36 yen.

The euro was quoted at $1.3604-3606 and 137.89-93 yen against $1.3604-3614 and 137.85-95 yen in New York and $1.3634-3635 and 138.40-44 yen in Tokyo late Thursday afternoon.

The U.S. dollar remained top heavy in Tokyo following a slight depreciation against the yen overnight spurred by a drop in global risk appetite, said Minori Uchida, head of Tokyo global market research at the Bank of Tokyo-Mitsubishi UFJ.

In London overnight, concerns about the financial health of a major Portuguese bank triggered fears over the safety of eurozone financial institutions, leading traders to ditch the euro, Uchida said.

This also impacted the dollar, with declines in stocks on both sides of the Atlantic spurring the sale of the U.S. unit for the safe-haven yen, sending it to a one-and-a-half month low of 101.06 yen at one point in New York.

"But the Portuguese bank's troubles don't look like a sign of pervasive instability in the eurozone, and at any rate the European Central Bank has various safety nets at its disposal, so the effect of this should be temporary," Uchida said.

The jitters offered an opportunity for position adjustment as major currency pairs had been bound in a tight range for some time, he added.

This lack of volatility in currency markets can be attributed to uncertainty over the future as well as the dominance of accommodative monetary policy across the world's major economies, said Shinichiro Kadota, foreign exchange strategist at Barclays Bank.

Market participants looking to pin down a date for the U.S. Federal Reserve's expected interest rate hike are up against a lack of definitive cues from the central bank.

But Fed chair Janet Yellen's speech before the U.S. Senate Banking Committee next Tuesday could offer some clarity and add direction to the foreign exchange market, Kadota said.

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Source: Japan Economic Newswire

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