TOKYO, Aug 16: The dollar firmed in subdued Asian trade on Friday after uncertainty about the U.S. Federal Reserve’s stimulus withdrawal knocked it off an 11-day peak against the yen in the previous day’s trade.
Upbeat U.S. Jobless claims data initially spurred a rally on Thursday, suggesting an early end to the Fed’s $85 billion a month in asset purchases and lifting yields on U.S. Treasuries. But then disappointing data on industrial output and manufacturing set the stage for the dollar’s reversal.
‘This is a tough market for speculators. It’s big on volatility, but no clear trends,’ said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.
‘The market seems to have priced in tapering this September, and that’s why U.S. Treasury yields went up to around 2.8 percent, so that should be supporting the dollar/yen,’ he said.
The dollar rose 0.2 percent on the day to 97.57 yen, moving back toward Thursday’s high of 98.64 yen, which was its highest since Aug. 5. Support lies just above 97.00 yen, helping the U.S. Unit stay above its seven-week low of 95.810 hit last week.
The dollar index added 0.1 percent to 81.237, after Thursday’s volatile trade pushed it from a peak of 81.943 – its highest since Aug. 6 – to a low of 81.098.
Concerns about a recent outflow from U.S. Debt added to pressure on the dollar. The latest Treasury International Capital (TIC) data showed foreign investors sold long-term U.S. securities for a fifth straight month in June, undermined by U.S. Treasury outflows that were the largest on record.
‘Since we know that USD saw a temporary swoon in June but ultimately ended roughly unchanged on a trade-weighted basis, it is clear that the TIC data is not telling the full story for FX,’ said Citigroup strategist Todd Elmer in a note to clients.
‘We remain USD bulls for the time being, but the TIC raises further questions about the sustainability of the uptrend in the medium- to long-term,’ Elmer said.
China and Japan accounted for almost all of the record $40.8 billion of net foreign selling of Treasuries in June.
More recent data shows that Japanese investors turned to net buying of foreign debt, much of which was likely Treasuries.
The yield on the benchmark 10-year Treasury note edged up to 2.78 percent in Asia on Friday from its U.S. Close of 2.76 percent on Thursday, when it hit a two-year high of 2.823 percent.
The euro edged down slightly to $1.3340. The single currency also saw volatile trade on Thursday, falling to a two-week low of $1.3205 before rising as high as $1.3363.
‘There was no rhyme or reason to the (dollar’s) move,’ said one trader at an Australian bank in Sydney, referring to Thursday’s choppy trade. ‘It looks like gold went first, and then the dollar cratered. Whether that was linked is hard to say.’
The trading range was so wide that stop-loss orders were filled on both the upper and lower ends of the day’s range, he added.
Gold slipped on Friday after first touching a fresh two-month high, and was last at $1,363.90. It surged more than 2 percent in the previous session, and the break of major resistance at $1,350 may have triggered selling in the dollar, the dealer in Sydney said.
New Zealand’s dollar skidded after a strong earthquake struck near the country’s capital of Wellington on Friday. This led investors to temper expectations on the speed and scale of any future rate hikes, though there were no immediate reports of damage.
The kiwi currency dropped as low as $0.8053, from a two-month peak of $0.8113 minutes before the quake hit. It later recovered to buy $0.8066.
News of the temblor sent neighbouring Australia’s currency higher to $0.9177, from a low of $0.9122. It was last up 0.1 percent at $0.9145. (AGENCIES)
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