News Column

Dollar stays in upper 103 yen as Yellen's Jackson Hole speech looms

August 22, 2014

Sophie Jackman

The U.S. dollar held in the upper 103 yen zone in Tokyo on Friday as caution prevailed in a wait-and-see mood ahead of a speech by Federal Reserve Chair Janet Yellen on the U.S. economic outlook.

At 5 p.m., the dollar fetched 103.76-77 yen compared with 103.79-89 yen in New York and 103.82-83 yen in Tokyo at 5 p.m. Thursday. It moved between 103.68 yen and 103.95 yen during the day, changing hands most frequently at 103.95 yen.

The euro was quoted at $1.3286-3288 and 137.86-90 yen against $1.3277-3287 and 137.88-98 yen in New York and $1.3274-3276 and 137.81-85 yen in Tokyo late Thursday afternoon.

The dollar slid gradually against the yen from midmorning, but remained in the upper 103 yen range, holding its gains from this week's rally on a combination of upbeat data and Federal Open Market Committee minutes revealing an increasingly hawkish attitude among Fed policymakers, said Toshiyuki Suzuki, senior market economist at the Bank of Tokyo-Mitsubishi UFJ.

A wait-and-see mood ruled the market ahead of Yellen's speech Friday at an annual conference of policymakers in Jackson Hole, Wyoming, and with a lack of market-moving events in Asian trading time, traders took the opportunity to lock in gains, Suzuki said.

In the absence of Jackson Hole, the dollar would normally be expected to have topped the 104 yen line on stronger-than-expected U.S. data released overnight, said Yuji Saito, executive director of foreign exchange at Credit Agricole Corporate & Investment Bank in Tokyo.

Weekly unemployment insurance claims went down 14,000 from the previous week to 298,000, and July's existing home sales showed resurgence.

Traders' appetite for the U.S. currency is growing amid data suggesting the world's largest economy is recovering smoothly and hints Fed policy board members are generally looking supportive of an early interest rate hike, Saito said.

"About 90 percent of market observers are expecting Yellen's speech to have a somewhat dovish tone," but any fall on the back of dovish comments will likely be temporary, and from next week the dollar is on track to climb higher, Saito said.

The euro held largely flat against the dollar and yen in Tokyo.

The common currency had slightly recovered from Thursday's 11-month low of $1.3242, but the longer-term trend is still for a weakening euro amid concerns over eurozone economic health, Suzuki said.

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Source: Japan Economic Newswire

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