US Dollar drops sharply versus yen, slips versus other rivals after long run
Frankfurt (May 11) The dollar was sharply lower against the yen on Wednesday, hurt by profit-taking after the greenback had logged a sixth advance in seven days and hit its highest in about two weeks.
There were little new economic or policy drivers for the dollar, which remains underpinned by expectations the Federal Reserve will likely raise interest rates modestly at some time this year, presumably putting the dollar in higher demand than currencies from lower-rate regions.
Read: Investors shouldn’t panic about the rising dollar—just yet
The buck’s brief backup against the yen soured dollar sentiment overall in the short term. The U.S. Dollar Index DXY, -0.24% , a measure of the dollar against a basket of major currencies, was down 0.2% at 94.06.
The U.S. currency USDJPY, -0.52% tumbled to as low as ¥108.52 earlier. It more recently was changing hands at ¥108.70 compared with ¥109.39 late Tuesday in New York.
The U.S. currency gained roughly 2% against the yen in the last couple of days after Japanese currency authorities’ repeated verbal warnings against the yen’s strength.
On Wednesday, the dollar’s fall below the ¥109-threshold triggered stop-loss sell orders, pushing the U.S. currency even lower. In addition, weakness in the Asian stocks also prompted investors to buy the yen, which considered as a traditional safe-haven asset in troubled times.
“We don’t see any specific trading cues,” to prompt the dollar selling, said Akira Moroga, manager of forex products group at Aozora Bank. He added that given steady gains for the dollar on Tuesday, selling looked inevitable.
Bucking overall strength of the yen, the New Zealand dollar NZDJPY, +0.0812% rose to as high as ¥74.61 from ¥73.86 after the release of the New Zealand central bank’s Financial Stability Report. The gain earlier in the morning was tied to the central bank’s concerns about housing price inflation, which helped cool speculation of another rate cut. But the currency trimmed much of its earlier gains, and was changing hands at ¥73.63 midday.
Meanwhile, the euro EURUSD, +0.2198% was trading at $1.1398 from $1.1373 and touched $1.1402 earlier.
“Our retail FX trader data shows ‘the crowd’ remains steadily net-short the euro versus the US dollar, and a contrarian view of herd sentiment suggests the EUR/USD may yet reach further highs,” said analysts at DailyFX in a note. “Indeed, positioning last turned short as the pair crossed above $1.0950 in early March with no interruption.”
They added: “An important caveat is that we have seen a notable week-over-week shift towards crowd buying; total long positions are up 26 percent while short positions have fallen 18 percent. Until we see a more sustained shift and a crowd flip to net-long, however, we will maintain our long-standing bullish trading bias.”
Source: MarketWatch
