TOKYO: The dollar was pinned at the week's lows against the yen on Thursday, Sept 30 with eyes on month-end flows for any selling pressure that might push it down further into possible danger zones for Japanese intervention.
The dollar, hobbled by speculation of more quantitative easing from the Federal Reserve, struggled near a five-month low on the euro and an eight-month low on a basket of currencies.
Dealers and analysts were watching for last-minute dollar sales by Japanese exporters on the last day of the fiscal half-year, with some talk too of whether passive money managers may have to rebalance at the month-end by selling dollars.
But with such flows hard to predict, the dollar remained supported by nervousness that Japanese authorities might swoop in as they did on Sept 15, when the Bank of Japan carried out yen-selling intervention for the first time in six years.
"We're in the intervention risk zone because the BOJ were intervening in and around these levels when they first came into the market," said Sue Trinh, senior currency strategist at RBC in Hong Kong.
The dollar slid 0.2% to 83.59 yen (RM3.09) and is down 0.7% down on the month but still above a 15-year low of 82.87 yen set just before Japan intervened two weeks ago.
Traders said intervention wariness would rise if the dollar fell below 83.00.
"The current levels are a bit in-between, but I think they may step in if the dollar breaks 83.50 and then drops to the upper half of the 82-83 yen range," said a trader for a Japanese bank, adding that intervention might be effective at this stage, since cross/yen pairs were holding up relatively well.
The real risk of the yen rising may come further down the line if the euro's rally against the dollar were to reverse, perhaps after a climb to US$1.37 (RM4.23) or US$1.38, he said. The euro was at US$1.3597 on Thursday.
But gauging the intervention trigger point was tricky and some said it might be hard for Japan to intervene at current levels as the latest moves came from dollar weakness rather than yen strength.
Japanese Economics Minister Banri Kaieda was also quoted as saying this week that intervention was a temporary measure and the government didn't want to "skew" the market.
The market is also waiting to see if the BOJ takes further easing steps to support the economy and counter the impact of the rising yen at its policy meeting next week.
Hedge fund adviser Medley Global Advisors said in a report on Wednesday obtained by Reuters the BOJ was preparing to ease again. In addition, an unexpected fall in industrial output on Thursday boosted the chances of more easing, with possible options seen as extending a cheap fund-supply.
Path of least resistance
The euro gave up some gains after hitting a five-month high of $1.3647 on Wednesday, to be down 0.2% on the day.
It is by no means problem-free itself, with the European Commission proposing steep compulsory deposits and fines for euro zone countries that breach budget rules and trade unions staging strikes and protests against austerity measures.
The market will also be watching an expiry of European Central Bank liquidity operations on Thursday.
But with the Fed seen as inching closer to fresh quantitative easing to aid the world's largest economy, even if Fed officials disagreed on Wednesday on what should prompt more support, the overall bearish dollar theme persisted.
"Speculation of QE2 lingers and is not going away any time soon. That should keep the U.S. dollar under pressure, which leaves the path of least resistance to the upside for the Aussie and the euro," Trinh said.
The Australian dollar hit its highest since July 2008 on Wednesday at $0.9730, although it was 0.1% lower on the day at $0.9667 on Thursday.
Robert Reilly, co-head of flow fixed income and currencies for Asia at Societe Generale CIB, expected gains in currencies such as the Aussie would continue if stock markets rose.
But rallies were becoming stretched, with a risk of a snap back in markets some time in October.
"There's not a lot to be bullish about really but the market continues to rally," Reilly said.
"What it is, is the view that the Fed's going to come in and print more money, and people will buy things with that increase in liquidity." -- Reuters
The dollar, hobbled by speculation of more quantitative easing from the Federal Reserve, struggled near a five-month low on the euro and an eight-month low on a basket of currencies.
Dealers and analysts were watching for last-minute dollar sales by Japanese exporters on the last day of the fiscal half-year, with some talk too of whether passive money managers may have to rebalance at the month-end by selling dollars.
But with such flows hard to predict, the dollar remained supported by nervousness that Japanese authorities might swoop in as they did on Sept 15, when the Bank of Japan carried out yen-selling intervention for the first time in six years.
"We're in the intervention risk zone because the BOJ were intervening in and around these levels when they first came into the market," said Sue Trinh, senior currency strategist at RBC in Hong Kong.
The dollar slid 0.2% to 83.59 yen (RM3.09) and is down 0.7% down on the month but still above a 15-year low of 82.87 yen set just before Japan intervened two weeks ago.
Traders said intervention wariness would rise if the dollar fell below 83.00.
"The current levels are a bit in-between, but I think they may step in if the dollar breaks 83.50 and then drops to the upper half of the 82-83 yen range," said a trader for a Japanese bank, adding that intervention might be effective at this stage, since cross/yen pairs were holding up relatively well.
The real risk of the yen rising may come further down the line if the euro's rally against the dollar were to reverse, perhaps after a climb to US$1.37 (RM4.23) or US$1.38, he said. The euro was at US$1.3597 on Thursday.
But gauging the intervention trigger point was tricky and some said it might be hard for Japan to intervene at current levels as the latest moves came from dollar weakness rather than yen strength.
Japanese Economics Minister Banri Kaieda was also quoted as saying this week that intervention was a temporary measure and the government didn't want to "skew" the market.
The market is also waiting to see if the BOJ takes further easing steps to support the economy and counter the impact of the rising yen at its policy meeting next week.
Hedge fund adviser Medley Global Advisors said in a report on Wednesday obtained by Reuters the BOJ was preparing to ease again. In addition, an unexpected fall in industrial output on Thursday boosted the chances of more easing, with possible options seen as extending a cheap fund-supply.
Path of least resistance
The euro gave up some gains after hitting a five-month high of $1.3647 on Wednesday, to be down 0.2% on the day.
It is by no means problem-free itself, with the European Commission proposing steep compulsory deposits and fines for euro zone countries that breach budget rules and trade unions staging strikes and protests against austerity measures.
The market will also be watching an expiry of European Central Bank liquidity operations on Thursday.
But with the Fed seen as inching closer to fresh quantitative easing to aid the world's largest economy, even if Fed officials disagreed on Wednesday on what should prompt more support, the overall bearish dollar theme persisted.
"Speculation of QE2 lingers and is not going away any time soon. That should keep the U.S. dollar under pressure, which leaves the path of least resistance to the upside for the Aussie and the euro," Trinh said.
The Australian dollar hit its highest since July 2008 on Wednesday at $0.9730, although it was 0.1% lower on the day at $0.9667 on Thursday.
Robert Reilly, co-head of flow fixed income and currencies for Asia at Societe Generale CIB, expected gains in currencies such as the Aussie would continue if stock markets rose.
But rallies were becoming stretched, with a risk of a snap back in markets some time in October.
"There's not a lot to be bullish about really but the market continues to rally," Reilly said.
"What it is, is the view that the Fed's going to come in and print more money, and people will buy things with that increase in liquidity." -- Reuters
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