News Column

Dollar bound in mid-101 yen zone as traders remain wary of risk

July 22, 2014

Sophie Jackman

The U.S. dollar traded in a boxed range in the mid-101 yen zone in Tokyo on Tuesday as ongoing caution over geopolitical risks muffled dollar-positive optimism over the U.S. economy.

At 5 p.m., the dollar fetched 101.49-50 yen compared with 101.35-45 yen in New York at 5 p.m. Monday and 101.40-41 yen in Tokyo at 5 p.m. Friday. Markets in Tokyo were closed Monday for a national holiday.

The U.S. currency moved between 101.38 yen and 101.57 yen during the day, changing hands most frequently at 101.48 yen.

The euro was quoted at $1.3503-3504 and 137.05-09 yen against $1.3519-3529 and 137.07-17 yen in New York late Monday and $1.3530-3531 and 137.20-24 yen in Tokyo late Friday afternoon.

The dollar rose slightly against the yen during the day as markets in Tokyo reopened after the national holiday.

Risk aversion ebbed slightly as U.S. stocks trimmed earlier losses over the holiday, supporting dollar buying amid ongoing unease over Ukraine and the Middle East, said Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow.

"The other main factor is that when Tokyo markets come back from a holiday, we usually see a flurry of dollar buying by Japanese importers, and that's underpinning the dollar against the yen today," Sakai said.

U.S. June consumer prices due out later Tuesday are in focus, with the Federal Reserve watching the consumer price index as one factor in determining how to time the tightening of its monetary policy.

"Dollar buying in anticipation of a strong CPI is likely to be muted in Tokyo, but overseas tonight we could easily see this pick up and put the dollar into the upper 101 yen zone," Sakai said.

May's strong consumer prices were described by Fed chair Janet Yellen as "noise," but a second run of upbeat data could stoke market expectations that the Fed will fast-track interest rate hikes, underpinning the dollar, said Toshiyuki Suzuki, senior market economist at Bank of Tokyo-Mitsubishi UFJ.

"Even if Yellen herself dismisses a strong June CPI as further 'noise,' it could well convince market participants the U.S. economy is picking up fast enough to bring forward a rate hike," Suzuki said.

The euro eased slightly against the dollar and yen late in Tokyo trading.

"We're still concerned about how geopolitical hot spots will develop from now, but it doesn't seem to be a lasting muffling effect on the global economy," Sakai said.

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Source: Japan Economic Newswire

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