TOKYO: The dollar steadied against the yen on Friday, Aug 20, but stayed within reach of a 15-year trough hit last week, after weaker US data prompted investors to sell higher-yielding currencies and stocks on risk aversion.
Data showed on Thursday that new US jobless claims marked a nine-month high last week, and Mid-Atlantic manufacturing shrank in August for the first time in more than a year, deepening worries about the US economic recovery.
Assets with less risk such as government bonds, the yen and the Swiss franc benefited from concerns about the world's biggest economy.
Against the Japanese currency, the greenback fell on Thursday towards a 15-year low of ''84.72 (RM3.12), while two-year US Treasury yields hit an all-time low.
The dollar/yen rate has a high correlation with US and Japanese government bond yield spreads, which are now narrowing.
But the dollar has managed to rise above the psychologically key 85.00 yen level thanks to caution among traders about possible intervention by Japanese authorities.
"Safe-haven demand dominates financial markets once again," said Tsutomu Soma, senior manager of the foreign securities department at Okasan Securities.
"Everyone thinks the dollar will extend losses against the yen. But fears of intervention and caution about additional monetary easing steps in Japan are making players hesitate to aggressively sell the dollar for now."
The dollar fell as low as ''85.19 in early Asian trade before climbing back to ''85.47, up 0.1 percent from late US trade.
Against the Swiss franc, the dollar edged up 0.1% to CHF1.0323 (RM3.14), having dropped to a seven-month low of CHF1.0257 on Thursday.
The dollar index, gauge of its performance against a basket of six major currencies, inched up 0.1% to 82.532.
The euro was down 0.1% at US$1.2807 (RM4.02) after falling as low as US$1.2772 on trading platform EBS on Thursday. Support comes in at the 100-day moving average around US$1.2770.
Against the yen, the single European currency hit a seven-week low of ''109.02 on EBS, but found support at the psychologically important ''109.00 level. A fall below ''109.00 would open the way for a slide towards an 8'' year low of ''107.30 reached in late June, traders said. The euro was flat at ''109.48.
There is market talk of large stop loss orders below the ''108.80 area for the pair, while bids are seen sitting mostly around ''108.95/96, traders said.
The Bank of Japan (BoJ) may consider easing monetary policy next month and is lining up its options, but is in no mood to act in the near term.
But there has been persistent speculation that the yen's strength may nudge it to act before its September rate review, or even before a meeting between Prime Minister Naoto Kan and BoJ governor Masaaki Shirakawa expected next week.
Traders said investors speculate the BoJ will tweak its new fund supply operation introduced last December or buy more Japanese government bonds.
"The yen is highly unlikely to reverse its upward trend if the BoJ only announces an extension of its new operation," said a trader at a big Japanese bank. "Many people doubt the step's effectiveness in helping the economy."
Even if any new policy measures boost major currencies against the yen, Japanese exporters who have been unable to sell enough dollars and euros due to the yen's recent strength will use any bounce in those currencies as an opportunity to repatriate their overseas profits, traders say.
The Australian dollar was softer a day before Australia's general election on Saturday as concerns about a slowdown in the United States dented appetite for higher-yielding currencies and other types of assets with more risks. The Aussie dipped 0.1% to US$0.8915. ' Reuters
Data showed on Thursday that new US jobless claims marked a nine-month high last week, and Mid-Atlantic manufacturing shrank in August for the first time in more than a year, deepening worries about the US economic recovery.
Assets with less risk such as government bonds, the yen and the Swiss franc benefited from concerns about the world's biggest economy.
Against the Japanese currency, the greenback fell on Thursday towards a 15-year low of ''84.72 (RM3.12), while two-year US Treasury yields hit an all-time low.
The dollar/yen rate has a high correlation with US and Japanese government bond yield spreads, which are now narrowing.
But the dollar has managed to rise above the psychologically key 85.00 yen level thanks to caution among traders about possible intervention by Japanese authorities.
"Safe-haven demand dominates financial markets once again," said Tsutomu Soma, senior manager of the foreign securities department at Okasan Securities.
"Everyone thinks the dollar will extend losses against the yen. But fears of intervention and caution about additional monetary easing steps in Japan are making players hesitate to aggressively sell the dollar for now."
The dollar fell as low as ''85.19 in early Asian trade before climbing back to ''85.47, up 0.1 percent from late US trade.
Against the Swiss franc, the dollar edged up 0.1% to CHF1.0323 (RM3.14), having dropped to a seven-month low of CHF1.0257 on Thursday.
The dollar index, gauge of its performance against a basket of six major currencies, inched up 0.1% to 82.532.
The euro was down 0.1% at US$1.2807 (RM4.02) after falling as low as US$1.2772 on trading platform EBS on Thursday. Support comes in at the 100-day moving average around US$1.2770.
Against the yen, the single European currency hit a seven-week low of ''109.02 on EBS, but found support at the psychologically important ''109.00 level. A fall below ''109.00 would open the way for a slide towards an 8'' year low of ''107.30 reached in late June, traders said. The euro was flat at ''109.48.
There is market talk of large stop loss orders below the ''108.80 area for the pair, while bids are seen sitting mostly around ''108.95/96, traders said.
The Bank of Japan (BoJ) may consider easing monetary policy next month and is lining up its options, but is in no mood to act in the near term.
But there has been persistent speculation that the yen's strength may nudge it to act before its September rate review, or even before a meeting between Prime Minister Naoto Kan and BoJ governor Masaaki Shirakawa expected next week.
Traders said investors speculate the BoJ will tweak its new fund supply operation introduced last December or buy more Japanese government bonds.
"The yen is highly unlikely to reverse its upward trend if the BoJ only announces an extension of its new operation," said a trader at a big Japanese bank. "Many people doubt the step's effectiveness in helping the economy."
Even if any new policy measures boost major currencies against the yen, Japanese exporters who have been unable to sell enough dollars and euros due to the yen's recent strength will use any bounce in those currencies as an opportunity to repatriate their overseas profits, traders say.
The Australian dollar was softer a day before Australia's general election on Saturday as concerns about a slowdown in the United States dented appetite for higher-yielding currencies and other types of assets with more risks. The Aussie dipped 0.1% to US$0.8915. ' Reuters
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