News Column

Dollar hovers in upper 101 yen amid wait-and-see mood on Fed outlook

July 8, 2014

Sophie Jackman

The U.S. dollar wavered within the upper 101 yen zone in Tokyo on Tuesday in tepid trading as market participants awaited hints about the U.S. Federal Reserve's next move amid signs of economic recovery in the world's largest economy.

At 5 p.m., the dollar fetched 101.80-82 yen compared with 101.83-93 yen in New York and 102.04-06 yen in Tokyo at 5 p.m. Monday. It moved between 101.68 yen and 101.89 yen during the day, changing hands most frequently at 101.75 yen.

The euro was quoted at $1.3591-3592 and 138.36-40 yen against $1.3600-3610 and 138.55-65 yen in New York and $1.3585-3586 and 138.63-67 yen in Tokyo late Monday afternoon.

The dollar flattened out against the yen in Tokyo after dropping overnight on a fall in U.S. Treasury yields, said Shinichiro Kadota, foreign exchange strategist at Barclays Bank.

Despite positive June U.S. jobs data released Thursday, many market participants believe that Fed chair Janet Yellen is "unlikely to move forward 'return to normal' monetary policy such as an interest rate hike, based on her record of dovish comments," Kadota said.

While nonfarm payrolls grew significantly and the jobless rate shrank in June, other figures Yellen has indicated that she follows such as wage growth and labor participation have not caught up.

The minutes of the Federal Open Market Committee's June policy meeting are set to offer clarity on the Fed's mindset, so trading is subdued leading up to their release on Wednesday, Kadota said.

Expecting the minutes will show some degree of split opinions, Kadota said the "key point is how (Fed policymakers) have been debating their exit strategy from loose monetary policy, and their time line for the exit."

The dollar is heavily supported at around 101.7 yen and should not drop below that level ahead of the minutes' release, he added.

The rest of the week brings the posting of U.S. companies' April-June quarter earnings reports, which depending on their contents could provoke stock selling and bond buying, putting pressure on the dollar, said Daisuke Uno, chief strategist at Sumitomo Mitsui Banking Corp.

The euro was little changed against the dollar after a slight gain overnight.

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Source: Japan Economic Newswire

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