Dollar rebounds against
yen on Fed rate talk
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[August 17, 2016]
By Shinichi Saoshiro
TOKYO (Reuters) - The dollar rebounded
from 7-week lows against the yen on Wednesday following hawkish
comments from Federal Reserve officials.
Easing risk aversion also reduced bids for the safe-haven Japanese
currency as shares in Tokyo bounced. [.T]
The dollar was up 0.8 percent at 101.100 yen <JPY=>, with its
advance accelerating after it rose past the 100.68 area, which
traders had deemed a near-term level of resistance.
The U.S. currency had fallen to 99.550 yen overnight, its lowest
since June 24, when post-Brexit referendum turmoil had boosted the
safe-haven yen.
The euro lost 0.2 percent to $1.1261 <EUR=> following an overnight
rise to $1.1323, its highest since June 24.
The greenback had been on the defensive since late last week as
downbeat U.S. indicators dented prospects of a near-term Fed rate
hike.
But it gained some reprieve on Wednesday on hawkish views expressed
by Atlanta Fed President Dennis Lockhart, who said two hikes in 2016
was a possibility, and on New York Fed President William Dudley
saying the central bank could possibly raise rates as soon as
September.
"Hawkish views from Fed officials can prompt short covering in the
dollar, but they are not sufficient enough to kick off an uptrend,"
said Junichi Ishikawa, forex analyst at IG Securities in Tokyo.
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"This is because the markets now expect only one or two rate hikes
this year, when at the end of 2015 they had expected up to four,"
added Ishikawa, who sees negative economic developments in Europe
and Britain in the wake of Brexit weighing on the Fed's decisions
and cancelling out any lift from positive U.S. indicators.
Uncertainty over Japanese monetary policy was also seen supporting
the yen in the medium term. The BOJ, which underwhelmed the markets
in July with what many investors deemed were token easing steps,
will conduct a comprehensive policy review in September.
"Policy uncertainty has been weighing on Japanese bonds for a while
and now the currency market seems to be taking notice as well," said
Makoto Noji, a senior strategist at SMBC Nikko Securities in Tokyo.
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U.S. dollar bank notes are seen in a bank in Budapest August 8,
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Analysts say Japan's debt market has been unsettled by speculation
that the BOJ would choose against taking interest rates deeper into
negative territory or increasing its bond buying.
The dollar index was up 0.3 percent at 95.025 <.DXY> after losing 0.8 percent on
Tuesday, when it touched a 7-week trough of 94.426.
Currency markets will seek fresh direction from comments expected from St. Louis
Fed President James Bullard and the release of the Fed's July policy meeting
minutes later in the session.
Having struck near 31-year lows earlier in the week, sterling traded almost
unchanged at $1.3028 <GBP=D4> following a 1.3 percent rise overnight due to
slightly higher than expected U.K. inflation data.
Investors will look to the British employment data later in the session to see
if the pound can solidify its position.
The Canadian dollar slipped to C$1.2882 <CAD=D4> per dollar after touching a
7-week high of C$1.2798 on Tuesday, when it was helped by crude oil's advanced
to 1-month highs.
The Australian dollar lost 0.4 percent to $0.7663 <AUD=D4> and the New Zealand
dollar was down 0.3 percent at $0.7252 <NZD=D4>.
(Editing by Simon Cameron-Moore and Kim Coghill)
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