By Hiroyuki Kachi
The dollar weakened against the yen in Asian trade Wednesday,
with stronger risk aversion prompting safe haven buying of the
Japanese currency following a lackluster reading from the Bank of
Japan's corporate sentiment survey.
The U.S. currency slid to as low as Y119.42 before bouncing back
to Y119.54 around 0250 GMT, compared with Y120.14 late Tuesday in
New York.
The greenback had been moving in a tight range either side of
the Y120 mark earlier in the session, with investors largely on
cruise control ahead of closely watched U.S. labor data out Friday,
but it fell alongside the Nikkei Stock Average following the
release of the BOJ's quarterly tankan survey. The Nikkei briefly
fell 1.5% to 18927.95, its lowest since March 12. The benchmark
index later trimmed its earlier losses, and was down 0.9%
midday.
Despite expectations that the weak yen would improve their mood,
the BOJ tankan showed the main index measuring sentiment among big
manufacturers was unchanged at plus 12 from the December poll.
Economists surveyed by The Wall Street Journal and the Nikkei had
expected a reading of plus 14.
The BOJ tankan "was not good overall," indicating that the
economy is stalling rather than recovering, said Mizuho Securities
chief FX strategist Kengo Suzuki.
Mr. Suzuki said stop-loss selling orders gave the dollar an
extra slide against the yen before dip buying kicked in.
Still, the dollar's strength against a basket of major
currencies including the euro in recent sessions, suggests "hopes
for the U.S. rate increase in June still remain pervasive," said IG
Securities market analyst Junichi Ishikawa, after comments by a
Federal Reserve official overnight. "It seems investors are
continuing to build up dollar-long positions," he said.
The WSJ Dollar Index, a measure of the dollar against a basket
of major currencies, was down 0.39% at 87.60 after four consecutive
session of gains.
Attention to the yen's strength against other currencies is also
needed, he added. If the stronger dollar bites into the bottom line
of U.S. corporate earnings, hurting stocks later this month, the
yen may remain firm or gain against the dollar despite its overall
strength against other currencies, he said.
The euro was higher at $1.0780 from $1.0732, with short-covering
kicking in. The common currency was down at Y128.87 from
Y128.92.
Jeffrey Lacker, the president of the Federal Reserve Bank of
Richmond and a voting member of the Federal Open Market Committee,
suggested Tuesday that a June rate increase was still in the
cards.
"I expect that, unless incoming economic reports diverge
substantially from projections, the case for raising rates will
remain strong at the June meeting," he said.
Interbank Foreign Exchange Rates At 22:50 EST / 0250 GMT
Latest Previous %Chg Daily Daily %Chg
Dollar Rates Close High Low 12/31
USD/JPY Japan 119.53-54 120.12-13 -0.50 120.15 119.42 -0.16
EUR/USD Euro 1.0782-85 1.0733-36 +0.46 1.0786 1.0732 -10.87
GBP/USD U.K. 1.4868-73 1.4816-21 +0.35 1.4873 1.4817 -4.54
USD/CHF Switzerland 0.9696-700 0.9724-28 -0.29 0.9731 0.9684 -2.46
USD/CAD Canada 1.2645-50 1.2682-87 -0.29 1.2694 1.2648 +8.83
AUD/USD Australia 0.7641-45 0.7605-09 +0.47 0.7665 0.7605 -6.46
NZD/USD New Zealand 0.7481-87 0.7467-73 +0.19 0.7492 0.7443 -3.99
Euro Rate
EUR/JPY Japan 128.85-89 128.91-95 -0.05 129.04 128.60 -11.09
Source: ICAP PLC
Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com