News Column

Dollar stays mostly in lower 102 yen range despite weak Japan data

August 13, 2014

Ryotaro Nakamaru

The U.S. dollar stayed mostly in the lower 102 yen range Wednesday in Tokyo as traders remained unmoved in the face of data showing softness in the Japanese and European economies.

At 5 p.m., the dollar fetched 102.45-47 yen compared with 102.21-31 yen in New York and 102.28-29 yen in Tokyo at 5 p.m. Tuesday. It moved between 102.23 yen and 102.48 yen during the day, changing hands most frequently at 102.29 yen.

The euro was quoted at $1.3351-3352 and 136.78-82 yen against $1.3365-3375 and 136.65-75 yen in New York and $1.3366-3368 and 136.71-75 yen in Tokyo late Tuesday afternoon.

Japan's gross domestic product shrank an annualized real 6.8 percent in the April to June quarter, the government said Wednesday, falling at its fastest pace since the January-March quarter of 2011 when the country was hit by a massive earthquake and tsunami.

The 3-percentage-point consumption tax hike on April 1 dealt a blow to spending in the country, with personal consumption falling 5.0 percent on quarter.

Traders' reactions were muted, however, as the fall in GDP was mostly in line with economists' forecasts, dealers said.

"It's a reaction to the spike in demand before the tax hike, so it's not something to be overly anxious about," said Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow.

"But if there isn't a recovery in the July-September quarter, the government will have to do something. There will be pressure on the Bank of Japan to act with further stimulus."

The euro traded in a narrow range against the dollar and the yen on Wednesday, showing little reaction to economic indicators out of Europe.

Consumer prices in Germany rose by just 0.8 percent in July from a year earlier, unchanged from a preliminary reading, while those in France grew by 0.5 percent, according to data released Wednesday.

The numbers do not bode well for a final reading of July consumer prices in the entire eurozone due Thursday. The European Central Bank is aiming for inflation just under 2 percent in the medium to long term.

"The recent slump in Germany combined with concerns over the current situation in Ukraine have made people bearish toward the European economy," said Shinichiro Kadota, foreign exchange strategist at Barclays Bank. Preliminary GDP data for the April-June quarter also due Thursday may compound those worries.

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Source: Japan Economic Newswire

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