News Column

Dollar edges up into mid-102 yen zone ahead of U.S. inflation data

August 18, 2014

Sophie Jackman

The U.S. dollar rose into the mid-102 yen zone in Tokyo on Monday ahead of the release of U.S. consumer price data later in the week, while ongoing pressure from low U.S. Treasury yields and weak sentiment kept the currency from gaining significant upward momentum.

At 5 p.m., the dollar fetched 102.47-48 yen compared with 102.31-41 yen in New York and 102.52-53 yen in Tokyo at 5 p.m. Friday. It moved between 102.25 yen and 102.49 yen during the day, changing hands most frequently at 102.32 yen.

The euro was quoted at $1.3385-3387 and 137.16-20 yen against $1.3395-3405 and 137.07-17 yen in New York and $1.3376-3377 and 137.13-17 yen in Tokyo late Friday afternoon.

The dollar edged up in the afternoon, recovering some ground from its geopolitical risk-fueled losses in New York on Friday, but the dollar-yen pair lacked a decisive direction as trading remained subdued, said Toru Sasaki, head of Japan rates and foreign exchange research at JPMorgan Chase Bank.

"The dollar against the yen is sensitive to fluctuations in long-term U.S. Treasury bond yields, and there is also position adjustment ahead of the consumer price data," Sasaki said.

The July consumer price data, due out Tuesday, are expected to give traders some clarity on the health of the U.S. economy and the likely policy response of the Federal Reserve, said Yuji Saito, executive director of foreign exchange at Credit Agricole Corporate & Investment Bank in Tokyo.

"Most speculation points to (an annual inflation figure of) 1.9 percent, down from June's 2.1 percent, but a figure of 2 percent or higher is likely to fuel dollar buying," Saito said.

The dollar had dropped rapidly from the mid-102 yen range in New York on Friday on flagging U.S. Treasury yields after reports Ukrainian and Russian forces had clashed inside Ukraine's territory, but Russia's denial of the intrusion and a subsequent lull in fresh news out of Ukraine prevented the dollar from falling further in Tokyo, Saito said.

Geopolitical concerns aside, the U.S. currency will likely stay bound in the 102 yen zone until traders are convinced the Federal Reserve is ready to take a more hawkish policy tack in the face of economic recovery, Saito said.

"In order for the dollar to clear 103 yen at this point, we'd need a much stronger-than-expected July inflation figure, or significantly hawkish opinions from policymakers in the (Federal Open Market Committee) July meeting minutes due out next Wednesday," he said.

The euro moved narrowly against the dollar and yen in Tokyo, with a dearth of fresh eurozone data and strong support for the euro at the $1.3320 mark likely to keep the currency stable this week, Saito said.

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Source: Japan Economic Newswire

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