News Column

Dollar firms in upper 103 yen zone after hawkish FOMC minutes

August 20, 2014

The dollar firmed slightly in the upper 103 yen zone in Tokyo to hit fresh highs not seen since early April on Thursday morning, as optimism about the U.S. economy ran high after the release overnight of minutes from the U.S. Federal Open Market Committee's July meeting showed a hawkish tone among the country's central bank policymakers.

At noon, the dollar fetched 103.87-93 yen compared with 103.70-80 yen in New York and 103.29-30 yen in Tokyo at 5 p.m. Wednesday.

The euro was quoted at $1.3247-3248 and 137.59-62 yen against $1.3254-3264 and 137.54-64 yen in New York and $1.3293-3294 and 137.31-35 yen in Tokyo late Wednesday afternoon.

Markets in Japan and the United States interpreted the FOMC minutes as showing a more hawkish attitude than widely expected, spurring dollar buying on expectations of an early interest rate hike by the Federal Reserve, said Minori Uchida, head of Tokyo global market research at the Bank of Tokyo-Mitsubishi UFJ.

According to the minutes of the July 29-30 meeting, many participants believe the Fed's monetary easing could end earlier than currently expected if labor and inflation data improve quickly.

Moderate dollar buying was expected to continue ahead of the impending annual symposium at Jackson Hole, Wyoming, put on by the Kansas City Fed, where Fed chair Janet Yellen is set to summarize her views on U.S. labor market recovery in a speech Friday.

"Some of the U.S. data released since the July FOMC meeting were worse than the month prior, and Yellen is likely to take this into account and take a somewhat more dovish tone than we saw in the minutes, which could push the dollar down in the wake of her speech, albeit temporarily," Uchida said.

"Until then, healthy risk sentiment means conditions are right for the dollar to gradually climb further, and traders could target early April's highs above the 104 yen mark," he added.

The euro slid further against the dollar in Tokyo amid ongoing concerns over eurozone economies, dealers said.

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Source: Japan Economic Newswire

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