News Column

Dollar in lower 101 yen amid geopolitical risks in Ukraine, Gaza

July 18, 2014

Ryotaro Nakamaru

The U.S. dollar traded in the lower 101 yen range Friday in Tokyo as traders stepped back from risk-averse yen buying spurred overnight by a crash near the Ukraine-Russia border of a passenger jet, apparently shot down, and rising tensions in Gaza.

At 5 p.m., the dollar fetched 101.40-41 yen compared with 101.12-22 yen in New York and 101.49-51 yen in Tokyo at 5 p.m. Thursday. It moved between 101.09 yen and 101.45 yen during the day, changing hands most frequently at 101.25 yen.

The euro was quoted at $1.3530-3531 and 137.20-24 yen against $1.3521-3531 and 136.82-92 yen in New York and $1.3533-3534 and 137.35-39 yen in Tokyo late Thursday afternoon.

The dollar and the euro recovered some of their earlier losses against the yen on demand from Japanese importers, dealers said.

Before the start of Tokyo trading on Friday, the U.S. currency had fallen to a one-week low of 101.06 yen and the European unit to a fresh five-month low of 136.69 yen, after the Malaysia Airlines plane carrying 298 passengers and crew from Amsterdam to Kuala Lumpur crashed Thursday.

The Ukrainian government suggested that the Donetsk People's Republic, a pro-Russian self-proclaimed separatist state in eastern Ukraine, shot the plane down. Both the state and Moscow denied the allegation.

But "many traders are concerned that the incident will lead to further sanctions against Russia (by the West), perhaps especially harsh ones because there were Westerners aboard," said Daisuke Karakama, chief market economist at Mizuho Bank.

Geopolitical concerns also mounted as the Israeli military said Thursday it had begun a ground attack in the Gaza Strip, the first since 2009, after over a week of exchanging rocket and missile fire.

"Israel and the Palestinians don't have oil trade, but if neighboring countries start getting involved, the situation could affect oil prices" and lead to more risk-averse behavior, said Yuji Saito, executive director of foreign exchange at Credit Agricole Corporate & Investment Bank.

U.S. 10-year Treasuries were bought for their safety over the deepening geopolitical worries, driving the yield down past the 2.5 percent mark and lessening the dollar's appeal.

"Some new development could come out over the weekend and cause major moves in currency market," Saito said. "The risk is for a higher yen."

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Source: Japan Economic Newswire

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