By Tatsuo Ito
The dollar softened against the yen in Asia on Monday as
overseas players locked in profits after its recent rapid rise to
fresh six-year highs.
The greenback hit Y109.46 last week, its highest since August
2008, as investors bet a stronger U.S. economy would eventually
prompt the Federal Reserve to raise interest rates. A wider
difference in interest rates between the U.S. and Japan typically
strengthens the dollar against the yen.
Still, sensing that the dollar's jump by about 5% from earlier
this month may have been too abrupt, some investors started
reducing their dollar long positions amid a lack of fresh cues,
traders said.
At 0450 GMT, the dollar was at Y108.79 compared with Y108.90
late Friday. In early Asia trade, it rose as high as Y109.16 due in
part to solid bids related to half-year book-closing trades by
Japanese firms ahead of the end of September.
"The dollar's upturn against the yen won't change, given there
were no complaints about the yen's decline at the weekend's G20
meeting and that U.S. Treasury Secretary (Jack) Lew has supported a
strong dollar," said Yuji Saito, executive director of foreign
exchange at Crédit Agricole Corporate & Investment Bank.
The Group of 20 industrial and developing nations agreed on
Saturday in Australia to aim for higher global growth over the next
five years via a wide-reaching package of structural measures, but
made little mention of policies affecting currencies and exchange
rates.
Mr. Saito said the dollar appears set to test the next technical
target of Y112.62 in the medium term.
Before that, however, "it won't be surprising to see the dollar
falling by Y2 to Y3" as hedge funds have excessively built up long
positions betting on a rise in the dollar, Mr. Saito added.
With major economic indicators thin on the ground this week, he
said the market may focus on a slew of speeches by U.S. Federal
Reserve officials, including New York Fed President William Dudley
and Chicago Fed chief Charles Evans, later this week.
Toshihiko Sakai, senior manager in the forex and financial
products trading division at Mitsubishi UFJ Trust and Banking, said
a further advance in the dollar may be difficult since "it's coming
close to Y110," which he and others consider a likely near-term
high.
Of more concern for Mr. Sakai is how the U.S. stock market will
fare ahead of U.S. midterm congressional elections later this
year.
"If the U.S. stock market loses ground, that could raise
questions about the dollar's strength," he said.
The euro was at $1.2860 from $1.2837. The WSJ Dollar Index, a
measure of the dollar against a basket of major currencies, was
down 0.25% at 76.72.
Interbank Foreign Exchange Rates At 00:50 EST / 0450 GMT
Latest Previous %Chg Daily Daily %Chg
2150 GMT High Low 12/31
Dollar Rates
USD/JPY Japan 108.75-76 108.98-09 -0.23 109.18 108.68 +3.27
EUR/USD Euro 1.2860-62 1.2832-37 +0.20 1.2868 1.2828 -6.43
GBP/USD U.K. 1.6349-52 1.6302-09 +0.27 1.6364 1.6290 -1.25
USD/CHF Switzerland 0.9384-88 0.9403-11 -0.22 0.9411 0.9380 +5.11
USD/CAD Canada 1.0932-36 1.0965-74 -0.32 1.0966 1.0928 +2.94
AUD/USD Australia 0.8935-38 0.8929-34 +0.05 0.8949 0.8924 +0.24
NZD/USD New Zealand 0.8158-62 0.8147-54 +0.12 0.8169 0.8138 -0.75
Source: ICAP PLC
Write to Tatsuo Ito at tatsuo.ito@wsj.com