lifted to three-and-a-half month highs by BOJ Kuroda's
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[May 21, 2014] By
The yen rose to a 3-1/2 month high against the dollar
and the euro on Wednesday, buoyed by optimistic comments
from Bank of Japan chief Haruhiko Kuroda which gave no
hint of further monetary easing in the near term.
Adding to the dollar's woes were lower U.S. Treasury yields which
diminishes the greenback's appeal. U.S. bond yields fell on Tuesday
after New York Federal Reserve President William Dudley said the
central bank would likely be gradual in raising interest rates.
Investors are also keeping an eye on the Federal Reserve's April
policy meeting minutes due later in the day. While the Fed is not
expected to raise rates until at least the middle of next year,
investors will be keen to learn whether officials discussed the
myriad issues about policy normalization.
The dollar fell to a 3-1/2-month low against the yen of 100.805 yen
in early London trade after Kuroda said a Japanese economic recovery
was on track after the sales tax hike in April. The tax hike was
expected to dampen consumer demand and put pressure on the BoJ to
ease policy in coming months.
But Kuroda gave nothing away about further easing. He said that the
massive asset purchase program launched last year was still working
and was having its desired effect.
The BoJ also raised its assessment on capital expenditure and Kuroda
reiterated that Japan is on course to meet the bank's 2 percent
inflation target in about a year from now.
The euro was also down 0.2 percent at 138.40, having fallen to
138.23 yen, its lowest since early February.
"Kuroda's comments are lowering expectations of further BoJ
stimulus. Investors have been long dollar/short yen so there is
position squaring going on which is driving the dollar lower," said
Manuel Oliveri FX strategist at Credit Agricole.
"At the same time one has to be cautious about the FOMC minutes with
Yellen also due to speak later in the day."
Federal Reserve Chair Janet Yellen is scheduled to give a
commencement address and receive an honorary degree in New York
later in the day.
The drop in U.S. yields was also helping the euro. The euro rose
0.15 percent to $1.3717, pulling away from a 2-1/2 month low of
$1.3648 hit last week on expectations the European Central Bank will
ease monetary policy in June.
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The euro is unlikely to make much headway ahead of potentially
destabilizing European Parliament elections later this week, where
votes for anti-austerity, Euroskeptic parties look set to increase.
The Australian dollar extended losses against its U.S. counterpart
and plumbed a fresh two-week low, hurt by a host of negative
factors. The Aussie slipped 0.1 percent to $0.9226 after brushing
$0.9216, its lowest since May 2.
The currency was knocked by a slide in prices of iron ore,
Australia's biggest export earner and media reports that suggested
the country's AAA credit rating was at risk.
A local newspaper reported that rating agency Standards and Poor's
could review Australia's AAA rating should the government fail to
realize large cuts to the budget in coming years.
The story was later disputed by an S&P spokesman.
"The Australian dollar may struggle for a while after the recent
plunge, but in the longer term it is likely to remain steady," said
Sho Aoyama, senior market analyst at Mizuho Securities in Tokyo.
(additional reporting by Shinichi Saoshiro in TOKYO; Editing by Toby
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