News Column

Dollar near 8-month high against yen on U.S. rate hike bets

September 2, 2014

The U.S. dollar traded near an eight-month high in the lower 105 yen range Wednesday morning in Tokyo as signs of a robust U.S. economy fed expectations that the U.S. Federal Reserve will raise its benchmark interest rate sooner than anticipated.

At noon, the dollar fetched 105.18-23 yen compared with 105.05-15 yen in New York and 104.83-85 yen in Tokyo at 5 p.m. Tuesday.

The euro was quoted at $1.3132-3134 and 138.12-14 yen against $1.3128-3138 and 137.95-138.05 yen in New York and $1.3126-3127 and 137.60-64 yen in Tokyo late Tuesday afternoon.

The dollar rose after a report released overnight by the Institute for Supply Management showed the U.S. manufacturing sector grew at its fastest pace in nearly three and a half years in August.

"The strong data fed expectations about Friday's employment report and was seen as supporting the case for a faster rate hike from the Fed," said Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow.

That placed the dollar just below the Jan. 2 high of 105.44 yen, the highest since October 2008. "There isn't much resistance for the dollar past that point. If it breaks through, we could see it reach 106 yen fairly quickly," Sakai said.

The U.S. currency carried momentum from Tuesday in Tokyo, where reports that Japanese Prime Minister Shinzo Abe is appointing a reform-minded welfare minister to shift the country's giant pension fund from investment in domestic bonds to riskier assets like foreign bonds and stocks dented the yen's haven appeal.

The appointment is set to be finalized later Wednesday.

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Source: Japan Economic Newswire

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