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The dollar rose against the yen in Asia Monday.
Written by article default Monday, 28 June 2010 08:36
Market OverviewThe dollar rose against the yen in Asia Monday as long-term investors bought the currency on its lows due to speculation that the U.S. Federal Reserve will hike its key interest rates next year while the Bank of Japan stays put.
Still, Monday's trading does not suggest the greenback will keep rising, and dealers said it could even fall sharply later this week.
That's because short-term investors who were on the sidelines in Asia Monday due to a lack of fresh cues are focusing more on U.S. economic data than the timing of the two central banks' next policy moves. If U.S. data due this week miss forecasts, U.S. Treasury yields and share prices could fall further, which will likely hurt the greenback, dealers said.
The dollar was at YEN89.44, higher than YEN89.26 New York last week. The ICE U.S. Dollar Index, which tracks the greenback against a trade-weighted basket of currencies, was at 85.328 from late Friday's 85.270.
The euro, meanwhile, was at USD1.2383 and YEN110.76 from USD1.2388 and YEN110.56 in New York Friday. The single currency was higher due to Japanese importers' buying, dealers said, noting that the euro's outlook depends on share price moves.
The British pound recovered from overnight losses after it gained approvals from credit rating companies this week. Fitch Ratings reported the UK’s new budget proposal ambitious and assured it would keep its AAA credit rating, while Moody’s Investors Services said the budget was supportive of the holding a top credit level. Endorsements from major credit agencies supported investor’s sentiments for a nation’s assets.
The Australian dollar pushed back to its highs from last week in Asian trade Monday, defying a wave of market participants calling for a drop in the currency.
Market expectation
While data was light in Asian trading, much of the focus centered around a joint statement from the Group of 20 nations following their weekend meeting in Toronto. While the group's official statement said it remains focused on containing budgets and debt levels, it also pledged to stick to the 2012 timetable to implement tougher capital and liquidity standards for banks.
Traders largely viewed the statement as somewhat divergent in views and in a move that continues to defy skeptics, bought into the Australian dollar. After a dip at the tail end of last week, the currency is now back near its highest point in a month.
Even so, strategists remain convinced the recent gains won't last, especially as European debt worries haven't evaporated and global stock market weakness continues.
USDYEN may get tailwind if BOJ quarterly tankan due Thursday in line with, or beats forecasts, as such result in BOJ survey should push up Japanese shares, a negative for safe-haven YEN but positive for higher-yielding USD as well as EUR, say dealers. Add investors with large assets expected to remain on sidelines ahead of Friday's non-farm payrolls data.
European stock markets are expected to open higher Monday, with the weekend's Group of 20 communiqué optimistic about debt reduction, despite ongoing worries about global growth following recent downbeat economic data.