September 29, 2010Dollar Set for Second Weekly Drop Versus Yen Amid Fed Easing Speculation
The dollar was poised for a second weekly drop versus the yen amid speculation the Federal Reserve will take additional steps to shore up the faltering recovery.
The euro gained for a fourth day versus the dollar before reports forecast to show U.S. manufacturing slowed last month and German retail sales increased in August. The Australian dollar rebounded after data showed China’s manufacturing activity rose, sparking demand for higher-yielding currencies.
“Underlying sentiment is still negative for the dollar as data continue to show weakness in the recovery momentum, which supports the view that the Fed will ease more,” said Naoto Minatogawa, a currency analyst in Tokyo at Himawari Securities Inc. “If the ISM survey confirms the deterioration, the dollar may head toward $1.40 per euro.”
The dollar was at 83.51 yen as of 10:06 a.m. in Tokyo from 83.53 yen in New York yesterday when it touched 83.17 yen, the least Sept. 15. The greenback was at $1.3655 per euro from $1.3634 yesterday when it hit $1.3683, the weakest since April 12. The euro traded at 114.03 yen from 113.88 yen.
On the week, the dollar has fallen 0.8 percent against the yen and 1.2 percent versus the euro.
The Fed announced on Sept. 21 it is prepared to do more to help the economy, fueling speculation policy makers will add securities to the central bank’s holdings by increasing their Treasury purchases, a plan known as quantitative easing.
Upside Surprises
“What has been driving dollar weakness has been expectations for monetary policy easing,” said Aroop Chatterjee, a currency strategist at Barclays Plc’s Barclays Capital unit in New York. “Monetary-policy rhetoric has been pointing to further easing measures being dependent on data, and if the data continues to surprise to the upside we could have a moderation of QE expectations in the U.S.”
Japan’s Vice Finance Minister Mitsuru Sakurai said yesterday the government is monitoring its currency as the yen touched its highest level since it intervened on Sept. 15.
Sakurai also said he expects the BOJ to make appropriate policy decisions at a monetary policy meeting next week. Japanese data this week showed exports grew at the slowest pace this year in August. ???“Investors seem to be ready to re-test the Japanese authority’s resolve to stem a harmful rise in the value of the yen, if forthcoming U.S. data continue to show deceleration in the growth,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker.
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