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 A Group of Seven finance ministers' meeting concluded on Saturday
with the United States warning Japan against intervening to weaken
the yen, a known rift that is perceived as preventing Tokyo from
acting.
Top of the agenda this week is whether U.S. data adds to the case
for a June or July hike in rates, with a handful of appearances by
U.S. Federal Reserve policymakers expected to back the case for a
move within months.
Sterling, and sterling options markets, were roughly steady after
last week’s rollercoaster ride following a shift in market odds away
from a vote for a Brexit from the European Union in next month's
referendum. <GBP=> <GBPVOL=>
With stock markets back on the defensive in Europe and Asia, the yen
- traditionally a haven for capital when markets are worried about
growth - rose 0.6 percent to 109.53 per dollar <JPY=> and 0.4
percent against the euro. <EURJPY=>
"The risks are to the upside for the dollar, but the key is that we
would remain selective in our long dollar positions. It is not an
across the board bullishness," said Bank of America Merrill Lynch
strategist Kamal Sharma.
"We like being long against commodity currencies. We would sell the
dollar against the yen on rallies."
Data on Monday showed Japan's trade balance in April was 823.5
billion yen ($7.50 billion), against economists' forecasts for a
492.8 billion yen increase. Japan logged a trade surplus for the
third consecutive month.
If a country's exports exceed its imports, as in Japan's recent
case, there is in theory a high demand for its goods and therefore
for its currency.
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"The April trade surplus was due in large part to weak imports. Still, the data
was enough to trigger yen buying," said Masashi Murata, senior currency
strategist at Brown Brothers Harriman in Tokyo.
"The trade numbers came out against a political backdrop that does not favor
Japan intervening to weaken the yen, thus making it relatively easy for
participants to buy back the yen."
The G7 disagreement on currencies helped push the Nikkei down more than 1
percent, adding further support to the safe-haven yen.
The U.S. currency was steady against the euro and other major peers, with the
New Zealand dollar the biggest gainer with a third of a percent rise that
retraced some of last week's weakness.
The dollar index was last at 95.211, little changed from where it closed in New
York on Friday and not far from Thursday's high of 95.520. It rose 0.8 percent
last week, climbing for a third week.
(Additional reporting by Shinichi Saoshiro in TOKYO)
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