Friday, 23 September 2016

Dollar on track for weekly losses in wake of Fed, BOJ moves

The dollar gained in Asian trading on Friday but was on track to end a tumultuous week with losses after the Federal Reserve trimmed its long-term interest rate expectations and the Bank of Japan rebooted its monetary policy framework.

The dollar was up 0.4 percent at 101.09 yen JPY=, pulling away from a nearly four-week low of 100.10 touched overnight, though still poised to shed 1.1 percent for the week.

Markets in Tokyo reopened after a public holiday on Thursday, and digested Wednesday's news that the U.S. Federal Reserve left interest rates unchanged but signaled it could still tighten monetary policy by the end of this year.

The U.S. central bank also projected a less aggressive rise in interest rates next year and in 2018, and it cut its longer-run interest rate forecast to 2.9 percent from 3.0 percent.

Also on Wednesday, ahead of the holiday, the BOJ shifted to targeting interest rates on Japanese government bonds as the focus of its massive monetary easing program, dropping its explicit target of increasing base money.

The BOJ's announcement initially sent the dollar up more than 1 percent to 102.79 yen, though the gains unraveled as investors realized that the overall market impact was far from obvious.

"The build-up to Wednesday was large, with lots of anticipation, but everyone kind of walked away scratching their heads," said Bart Wakabayashi, head of Hong Kong FX sales at State Street Global Markets.

"We're defaulting to the levels where the market is comfortable. There wasn't enough to energize the dollar through 100 yen, or 103," he said.

Some analysts took heart at the fact that the dollar was able to pull itself off its overnight session lows above the 100-yen level, which remains a key technical point.

A break of that could open the pair's downside, said Yutaka Miura, a senior technical analyst at Mizuho Securities.

The dollar's proximity to the 100-yen did not escape the attention of Japanese authorities.

"We're concerned about recent extremely nervous moves in the currency market," Chief Cabinet Secretary Yoshihide Suga told a regular news conference on Friday, when asked about the yen's recent rise against the dollar.

Japan's top currency diplomat, Masatsugu Asakawa, vice finance minister for international affairs, said on Thursday that Japanese financial authorities are watching for speculative currency market moves and would respond if needed.

Against the yen, the euro gained 0.2 percent to 113.20 yen EURJPY, down 0.8 percent for the week. It edged down 0.1 percent to $1.1197 EU, aiming for a 0.3 percent weekly gain.

The dollar index, which tracks the greenback against a basket of six major rivals, added 0.1 percent to 95.522 . on track to log a weekly loss of 0.6 percent.

The British pound gave back some of the previous session's gains made after a Bank of England policymaker said she saw no case for a further cut in interest rates to boost the economy following Britain's vote to leave the European Union.

After slipping to a five-week low of $1.2946 GBP on Wednesday, sterling climbed as high as $1.3121 overnight. It was last down 0.3 percent at $1.3040, up 0.3 percent for the week.

Reference: Lisa Twaronitr

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