News Column

Dollar firms to mid-101 yen before Fed, BOJ events

July 14, 2014

Ryotaro Nakamaru

The U.S. dollar firmed to the mid-101 yen range Monday in Tokyo as traders shook off worries of financial instability in Europe before major events such as a Bank of Japan policy meeting and U.S. Congressional testimony by Federal Reserve Chairwoman Janet Yellen.

At 5 p.m., the dollar fetched 101.47-48 yen compared with 101.32-42 yen in New York and 101.36-37 yen in Tokyo at 5 p.m. Friday. It moved between 101.33 yen and 101.53 yen during the day, changing hands most frequently at 101.37 yen.

The euro was quoted at $1.3635-3636 and 138.36-40 yen against $1.3602-3612 and 137.92-138.02 yen in New York and $1.3604-3606 and 137.89-93 yen in Tokyo late Friday afternoon.

After an uneventful Tokyo morning, the dollar firmed against the yen in the afternoon on an upgraded reading of Japan industrial output in May and a rally in Tokyo stocks. The U.S. currency shed concerns over the financial health of a major Portuguese bank which had boosted buying of the safe-haven yen late last week, dealers said.

But the dollar's gains were limited as the BOJ started a two-day meeting to vote on its current ultra-easy monetary policy, with Governor Haruhiko Kuroda scheduled to speak to the press on Tuesday.

"It's hard to imagine the BOJ will drastically change its stance at the meeting... so expectations of further easing are likely to remain subdued," said Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow.

The central bank will release an interim assessment of its semiannual report on the outlook for economic conditions and inflation in Japan after the meeting.

Should the BOJ make a downward revision to its forecast as the Japanese economy attempts to absorb a 3-percentage-point sales tax hike to 8 percent implemented in April, market players "will begin to wonder about the possibility of further easing measures" before an additional 2-percentage-point tax hike tentatively planned for October 2015, said Kengo Suzuki, chief foreign exchange strategist at Mizuho Securities Co.

Fed chief Yellen speaks before the U.S. Senate Banking Committee on Tuesday and the House Committee on Financial Services the following day.

Yellen has kept tight-lipped about when the Fed will raise its current near-zero benchmark rate since suggesting in March it would be sometime around mid-2015.

A less dovish stance by Yellen, while unlikely, could push up U.S. interest rates and prop up the dollar against the yen, Tokyo Forex & Ueda Harlow's Sakai said.

The euro firmed against the dollar and the yen in Tokyo afternoon trading as the Portuguese bank's situation was seen to be an isolated one. European Central Bank chief Mario Draghi speaks at the European Parliament later Monday.

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Source: Japan Economic Newswire

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