US Dollar drops below ¥100 as traders blame thin, summer markets
Frankfurt (Aug 16) The dollar fell to below 100 yen on Tuesday, for the first time first time since shortly after the U.K.’s vote to leave the European Union, with interest-rate moves in the U.S. and Japan on the minds of investors.
The dollar USDJPY, -1.40% dipped to ¥99.96, sharply below ¥101.25 late Monday in New York. Traders said thin trading volume and stop-loss orders exaggerated the gain in the Japanese currency, with many in financial markets taking the week off for summer holidays.
The yen briefly rose above 100 to the dollar after the U.K.’s Brexit vote June 23, trading in the 99-yen range on June 24 and July 8.
“Amid extremely thin volume, selling might have kicked in to intentionally induce stop-loss orders,” further weakening the dollar against the yen, said Yuzo Sakai, manager of FX business promotion at Tokyo Forex & Ueda Harlow. He and other market watchers said there was no particular news trigger for Tuesday’s currency movements.
Investors were watching the direction of interest rates in the U.S. and Japan. Weak retail sales in the U.S. led some investors to take the view that the Federal Reserve might hold off on interest-rate increases. If the Fed did wait, that would be negative for the dollar.
“Investors’ appetite for dollar buying remained low in the wake of downbeat U.S. economic indicators recently. Against that backdrop, I think there were some investors who opted to offload [the dollar] amid weakness in Tokyo stocks,” Sakai said.
On Tuesday, the benchmark Nikkei Stock Average NIK, -1.62% closed down 1.6% at 16,596.51.
Uncertainty about the Bank of Japan’s direction also continues to create instability in Tokyo markets. After the central bank decided on July 29 not to take significant new easing steps beyond an increase in purchases of stock funds, the yen rose because traders believed the BOJ was unlikely to lower interest rates further.
Monetary easing is one of the original “three arrows” in Prime Minister Shinzo Abe’s pro-growth Abenomics policy.
In February, the BOJ introduced a minus 0.1% rate on certain deposits held by commercial banks at the central bank.
“The yen’s strength is accelerating as investors become mindful about the limits of Abenomics,” said Junichi Ishikawa, market analyst at IG Securities.
Meanwhile, the euro EURJPY, -0.42% dropped to as low as ¥112.38 before slightly coming back to ¥112.78. The common currency was at ¥113.24 late Monday. Among other currency trading, the euro EURUSD, +0.9835% was at $1.1277 from $1.1182.
The British pound fell against the yen GBPJPY, -0.77% to ¥129.76 from ¥130.42.
Sterling GBPEUR, -0.3299% tapped a fresh three-year low against the euro, falling to €1.1462 on an intraday basis, down from €1.1516 late Monday in New York. The pound has since rebounded to €1.1510. Against the dollar, sterling GBPUSD, +0.6444% traded at $1.2979, up from $1.2880 on Monday.
Data released Tuesday showed the pound’s slump in the wake of the U.K.’s vote to leave the European Union resulted in a jump in U.K. import prices in July.
Source: Reuters
