News Column

Dollar holds steady in lower 102 yen as traders await Fed clarity

July 7, 2014

Sophie Jackman



The U.S. dollar traded narrowly in the lower 102 yen range in Tokyo on Monday as traders waited for clearer signs of a possible shift in U.S. monetary policy following last week's upbeat U.S. jobs data.

At 5 p.m., the dollar fetched 102.04-06 yen compared with 102.00-01 yen at 5 p.m. Friday in Tokyo. The New York market was closed Friday for the Independence Day holiday. In Tokyo, it moved between 102.03 yen and 102.21 yen during the day, changing hands most frequently at 102.19 yen.

The euro was quoted at $1.3585-3586 and 138.63-67 yen against $1.3591-3592 and 138.63-67 yen in Tokyo late Friday afternoon.

The dollar remained buoyant on optimism about U.S. economic recovery after jumping from the upper 101 yen range on Thursday in New York following the jobs data. But Tokyo traders held off on pushing it any higher, awaiting signs of whether the sunny jobs outlook will spur the U.S. Federal Reserve to bring interest rate hikes forward, said Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow.

The dollar was buoyed Thursday in New York as June nonfarm payrolls grew by a bigger-than-expected 288,000 jobs and the unemployment rate fell from May's 6.3 percent to 6.1 percent.

But "other U.S. figures including labor market participation and wages haven't quite caught up, so it's hard to tell if we will get a dramatic response from the Fed," Sakai said.

"Traders are holding off on bold dollar buying ahead of the (Federal Open Market Committee) minutes, due out Wednesday, which should illuminate feelings within the Fed about its outlook, with signs of hawkish sentiment in the minutes likely to drive up U.S. bond yields and lift the dollar against the yen," he said.

"The response of the New York market opening tonight after taking Friday off will be important too, and with the Dow (industrial stock average) having cleared 17,000 for the first time on Thursday, the question is whether it can find a stable footing there," Sakai said.

In particular focus are Fed vice chair Stanley Fischer's comments after taking the post last month, including a talk he is due to give on Thursday, said Toshiyuki Suzuki, senior market economist at the Bank of Tokyo-Mitsubishi UFJ.

"We want to find out how closely Fischer is aligned with (Fed chair Janet) Yellen -- if he echoes her comments from last week defending low interest rates, we can assume the Fed on the whole is looking more dovish, and this could push down the dollar," Suzuki said.

"Although the jobs news certainly makes the U.S. economy look stronger and is conducive to earlier rate hikes, at this point the market is still stuck on the 'if,' let alone 'how,' 'when' or 'what' specific actions the Fed will take, so the dollar looks to stay narrowly bound for a while," Suzuki added.

The euro remained weighed down against the dollar in the aftermath of Friday's 1.7 percent decline in German manufacturing orders in May, with expectations picking up of added easing by the European Central Bank, Sakai said.



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Source: Japan Economic Newswire


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