US Dollar dips after Japan rules out ‘helicopter money’
Tokyo (July 13) The yen inched higher against the dollar on Wednesday, after Japan’s top government spokesman ruled out implementing so-called “helicopter money,” that involves a central bank directly buying government bonds to finance government spending or tax cuts.
The U.S. dollar USDJPY, -0.07% was changing hands at ¥104.65, compared with ¥104.67 late Tuesday in New York.
Improved sentiment on hopes for Japan’s fresh fiscal stimulus have helped boost Tokyo stocks by 8% so far this week and caused unwinding of bullish yen bets. Investors have flocked to the safe-haven yen since the U.K. vote to leave the European Union last month.
After touching as high as ¥104.98 overnight, the greenback was drifting lower during Asia trade with profit taking kicking in earlier in the session. In addition, Japanese corporate players such as exporters appeared to have sold the dollar on its recovery.
The dollar hit as low as ¥103.94 during Tokyo’s lunch break after Japan’s Chief Cabinet Secretary Yoshihide Suga denied a local media report that said aides to Prime Minister Shinzo Abe are considering “helicopter money” as a possible policy measure.
Etsuro Honda, an economic adviser to Abe, had suggested the prime minister use helicopter money, Japanese business daily the Sankei Shimbun said in its Wednesday edition. The paper also said Mr. Abe’s special adviser Koichi Hamada told people involved it would be all right to consider the use of helicopter money on a one-off basis.
“There is no change to the U.K.’s departure from the EU. Italy’s non-performing loans haven’t disappeared. And the U.S. employment is not strong enough to shape investors views about (the Federal Reserve’s) rate increase.”
Ayako Sera, Sumitomo Mitsui Trust Bank.
“There is no truth that the government is considering such a policy,” said Suga at a press conference. But Suga said the government “is planning to introduce a comprehensive and bold economic stimulus.”
“The dollar is regaining from recent excessive selloff,” after the U.K. vote, said Ayako Sera, head of research division at Sumitomo Mitsui Trust Bank. The U.S. currency “will likely remain directionless for now, and would find it difficult to go upside unless there are fresh, encouraging incentives,” she said.
“There is no change to the U.K.’s departure from the EU. Italy’s non-performing loans haven’t disappeared. And the U.S. employment is not strong enough to shape investors views about (the Federal Reserve’s) rate increase,” she said.
“We would see a certain amount of selling (on recovery),” as the Y105-line is considered as psychologically important, said Kosuke Hanao, head of FX at HSBC in Tokyo. Mr. Hanao said short-covering is still going on, but it is premature to say investors will turn dollar bullish until the U.S. currency breaks above Y106.87, its high set on June 24.
In other currency pairs, the euro EURUSD, +0.1175% was slightly higher against the dollar at $1.1079, while the Brexit-battered pound GBPUSD, +0.2265% was also inching up to $1.3283.
The WSJ Dollar Index BUXX, -0.10% a measure of the dollar against a basket of major currencies, was down roughly 0.1% at 87.02.
Source: MarketWatch
