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The
greenback surged to its highest since January 2003 against a
basket of currencies <.DXY> last week and threatened parity with
the euro <EUR=>, after the U.S. Federal Reserve hinted that
rates could rise as many as three times next year.
But the dollar drifted a little on Friday and, at 102.88 on
Monday, was around 0.7 percent below Thursday's peak of 103.56,
with investors booking profits and lightening hefty bets on the
currency as a two-week holiday period began, meaning thin
liquidity.
"The strength we've had post Trump's election could fade a
little into the end of the year. People just close down some of
their long positions on the dollar," said HSBC currency
strategist Dominic Bunning, in London.
"Does the market still believe in the Trumpflation story? Does
it still believe Trump is going to deliver fiscal loosening,
with infrastructure spending, tax cuts etc? At the moment
there's been nothing to change that view."
Citi's head of G10 currency strategy in London, Richard Cochinos,
said a speech by Fed Chair Janet Yellen due at 1830 GMT would be
watched for any hint that last week's Fed meeting was
interpreted by markets as more hawkish than had been intended.
Against the yen, the dollar fell as much as 0.9 percent, before
recovering a touch to trade down half a percent on the day by
1140 GMT at 117.27 yen <JPY=>. The yen was boosted by data
showing Japan's export performance improved strongly in
November.
Data released on Friday showed dollar net long positions were
little changed in the week to Dec. 13, affirming a trend in
place since the Trump's election victory on Nov. 8. Net shorts
on the yen rose to their largest since early December last year.
[IMM/FX]
The Bank of Japan kicked off a two-day policy meeting on Monday,
at which it is expected to maintain its 10-year government bond
yield target as the weaker yen helps Japan's economic prospects,
a Reuters poll showed on Friday.
"The speed of the yen's weakening was likely much faster than
the BOJ anticipated," said Ayako Sera, market economist at
Sumitomo Mitsui Trust Bank in Tokyo.
"While no major changes are expected from the meeting, some
tweaks to policy are possible, to adjust to the new market
situation," she said.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.
apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Tokyo markets team; editing by John
Stonestreet)
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