US Dollar stays firm with Greece and Spain in the spotlight
London (May 25) The dollar remained firmer against the yen and the euro on Monday, with following comments by Federal Reserve Chairwoman Janet Yellen late last week and renewed concerns about Greece’s debt problems.
The euro fell after Greek leaders said the country won’t make InternationaI Monetary Fund repayments that are due in June. Some extra pressure came on political upsets in regional and municipal elections in Spain.
The U.S. currency USDJPY, -0.04% touched as high as ¥121.78 before slightly weakening to ¥121.53. The pair traded at ¥121.55 late Friday in New York.
Getting a boost from upbeat U.S. inflation and Yellen’s remarks, the dollar’s uptick to its year high of ¥122.04 set on March 10 has now come into sight.
U.S. core inflation in April, excluding volatile food and energy prices, showed the biggest gain since January 2013, while Yellen said the central bank is on track to raise interest rates sometime this year.
A solid gain in the Nikkei Stock Average NIK, +0.74% gave a support to the dollar by allowing selling of the yen, perceived as a safe asset. The benchmark index hit a fresh 15-year high, closing up 0.7% to 20,413.77.
U.S. stocks ended slightly lower Friday, capping off a week of low trading volumes and no market-moving catalysts. Uber is in talks for a $1 billion credit facility with six to seven banks.
But investors found it difficult to make any major moves, with many overseas investors away on holiday and a lack of fresh trading cues. Financial markets are closed elsewhere in the world including the U.S. for Memorial Day and the U.K. for Spring Bank Holiday. German markets are also closed.
“Investors were scared of heights,” when the dollar hit its year high in March, said Daisaku Ueno, chief FX strategist at Mitsubishi UFJ Morgan Stanley.
But after confirming solid downside support around ¥118 and ¥119, later in the year and then with “investors’ eyes accustomed to stay around ¥120” in recent session, the dollar is now positioned better to try its upside against the yen, said Ueno.
Investors showed a muted reaction to Japan’s merchandise trade balance for April released earlier Monday by the government.
A month after its first surplus in nearly three years, the world’s third largest economy logged a ¥Y53.4 billion deficit.
The euro EURUSD, -0.3268% fell under the $1.10 level after Greece said Sunday that it won’t have the money it must repay to the International Monetary Fund next month unless it strikes a deal with international creditors over further rescue funding.
The euro was trading around $1.0980 from $1.1017 late Friday, while the common currency was at ¥133.41 from Y¥133.83. “This money will not be given,” Interior Minister Nikos Voutsis told privately owned television station Mega, on Sunday. “It does not exist.”
“There is no doubting that Greece has become a frequent reoccurring risk to investor sentiment in recent months, and there is potential for investor sentiment towards the Euro to be pulled down even further by the news that anti-austerity parties were declared victorious in several local elections in Spain,” said Jameel Ahmad, market analyst at FXTM.
Also see: German finance minister sees no need to discuss ‘alternatives’ on Greece
In Spain, Sunday regional and local elections delivered blows to the ruling Popular Party as voters, fed up with austerity, a struggling economy and political curruption, cast support towards upstart parties.
Read: Spanish elections, Greece woes hits stocks, euro
The WSJ Dollar Index BUXX, +0.17% , a measure of the dollar against a basket of major currencies, was up 0.07% at 86.28.
Source: MarketWatch
