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Going into the final week of 2017, the trend remains towards a
stronger U.S. currency, although a 1 percent retreat for the
greenback before Christmas suggested any attack on 120 yen and
parity with the euro may have to wait until January.
Those bankers at their desks in continental Europe, with London
on holiday, said they would be watching chiefly for any sign of
a year-end squeeze in the cost for banks of borrowing dollars
relative to other currencies.
Such costs - called the cross currency basis - have been rising
and could support the dollar over the next few days. It was
around 0.1 percent higher respectively at 117.23 yen <JPY=> and
$1.0450 per euro <EUR=> by 0830 GMT.
"The rise in the euro dollar basis is an argument for dollar
strength. Plus you have the fundamental factors going into the
beginning of next year that point (that way)," said Lutz
Karpowitz, a strategist with Commerzbank in London.
"But so far it really has been quiet."
With Hong Kong and Sydney closed, there was little reaction in
Asian time to Japanese inflation data, which saw core consumer
prices mark the ninth straight month of annual declines in
November.
The yen has fallen by almost a fifth in value since the start of
November and some in Tokyo argue that a slowing of the rise in
U.S. Treasury yields and concerns over President-elect Donald
Trump's relationship with China may support the Japanese
currency going forward.
"Trump's policies are understood to be conducive to inflation
and a stronger currency. But a higher dollar would be a
significant setback to the U.S. economy seemingly in the ending
stages of an expansion," wrote Makoto Noji, senior strategist at
SMBC Nikko Securities.
"Therefore, the Trump administration and the Federal Reserve
would have to stick to a cautious monetary policy stance to
prevent the dollar from appreciating excessively. We thus expect
a very gradual downtrend for dollar/yen."
The Australian dollar was down 0.1 percent at $0.7187, inching
back towards a seven-month low of $0.7160 hit late last week on
concerns over China's economic growth.
The New Zealand dollar was steady at $0.6894, while sterling
dipped 0.2 percent to $1.2269.
(Additional reporting by Shinichi Saoshiro in TOKYO; editing by
John Stonestreet)
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