US Dollar pulls back against yen on fading hopes for BOJ action
Tokyo (Oct 29) The yen strengthened against its rival currencies in Asian trade Thursday, as investors bought the Japanese currency after unexpectedly strong industrial output data lowered expectations for an extra monetary easing measures from the Bank of Japan.
The U.S. dollar USDJPY, -0.13% weakened to as low as ¥120.78 before bouncing back to ¥120.75. That compared with ¥121.08 late Wednesday in New York.
Earlier in the session, the greenback was supported by overnight strength after the Federal Reserve signaled that an interest-rate increase within this year remained on the table.
Federal Reserve officials kept short-term interest rates unchanged near zero but opened the door wider to raising rates at its final 2015 meeting in December. The central bank’s statement suggested it was less concerned in recent weeks about turbulent financial markets and uncertain economic developments overseas.
However, later in the Asia session, the U.S. currency erased much of its overnight gains as investors bought back the yen, given news of unexpectedly strong Japanese output in September.
Industrial output rose 1.0% from the previous month, compared with a 0.5% fall forecast by a poll of economists by The Wall Street Journal and the Nikkei, lowering hopes among investors that the BOJ will take fresh action when the central bank meets to decide its monetary policy Friday.
“Investors used the fairly strong output data as an excuse to lock in profits,” leading to the dollar’s slide against the yen in the morning session, said Yuzo Sakai, manager of FX business promotion at Tokyo Forex & Ueda Harlow.
Also, the stock market’s lackluster performance also fuelled buying into the perceived safety of the yen. The Nikkei Stock Index NIK, +0.17% was down 0.1% by midday, while the Shanghai Composite Index SHCOMP, +0.36% gained a scant 0.1%.
“Given a higher dollar and a weaker yen after the FOMC, as well as the stock market’s rebound closer to 19000, investors gradually started to believe the BOJ doesn’t have to play the [easing] card now,” said Sakai.
The yen was also stronger against the euro EURJPY, +0.18% which fell to ¥131.59, its lowest since April 30, before stabilizing at ¥131.94. That compared with ¥132.24 late Wednesday. The U.K. pound EURJPY, +0.18% was at ¥184.18 from ¥184.82.
The yen also strengthened against the Australian dollar JPYAUD, +0.414642% , which fell to ¥85.75 from ¥86.14.
Among other currency pairs, the U.S. dollar was weaker against the euro EURUSD, +0.3021% , which was unchanged at $1.0924.
The WSJ Dollar Index BUXX, -0.05% , a measure of the U.S. dollar against a basket of major currencies, was down 0.01% at 89.14.
Source: MarketWatch
