Dollar rises as yen backtracks from sharp gains – MarketWatch

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The yen was moderately weaker against its rival currencies during Asian trade Monday, after sharp gains Friday following disappointment over the Bank of Japan’s surprisingly moderate monetary easing and weak U.S. economic growth.

The U.S. dollar USDJPY, +0.09%  to ¥102.49, compared with ¥102.04 late Friday in New York. The euro EURUSD, -0.0805%  to ¥114.46 from ¥114.17.

Earlier in the session, the greenback was initially tracking its weakness Friday. The U.S. currency then rose to an intraday high of ¥102.68 around lunch break, with Tokyo stocks turning into positive territory. The Nikkei Stock Average NIK, +0.40%  0.1% midday. But the dollar drifted lower for the rest of the session amid a lack of fresh trading cues.

After wide gyrations of the yen Friday, “investors are exhausted so they are not making major moves,” said Marito Ueda, director at FX Prime byGMO.

On Friday, the dollar fell about 3% to below ¥102 in highly volatile trade. The BOJ’s monetary easing disappointed investors who had expected more aggressive policy steps. Later in the New York trade hours Friday, weak U.S. GDP data added to doubts about U.S. Federal Reserve’s rate increase this year, pulling down the U.S. currency to as low as ¥101.97.

“What we’ve seen is a big difference between high expectations among overseas investors and the answer the Bank of Japan has offered,” said Ueda.

Ahead of a slew of economic data in the U.S. later this week, ranging from ISM manufacturing report on Monday and jobs data Friday, investors are now shifting focus to clarity about the Fed’s rate increase as early as in September. “Investors will start over again to take fresh positions,” said Mr. Ueda.

Still, investors showed muted reaction to remarks by Federal Reserve Bank of New York President William Dudley. Dudley who on Monday argued for continued caution over the path of U.S. interest rates, given uncertainty over the global outlook. But he warned that traders who have been ruling out an interest-rate increase later this year are growing too complacent.

In other currency trade, the Australian dollar gained moderately after mixed China data, with investors cautiously awaiting the policy decision by the Reserve Bank of Australia due Tuesday.

Read: China’s manufacturing PMI indicates contraction

The Australian dollar AUDUSD, -0.1843%  , which is closely linked to China growth, rose to $0.7607 and ¥77.92 AUDJPY, -0.15%  , respectively from $0.7592 and ¥77.55.

China’s official manufacturing purchasing managers’ index slipped below 50 level for the first time in five months, but China July Caixin manufacturing PMI came in at 50.6, better than the street forecast of 48.8.

The euro EURUSD, -0.0805%  at $1.1167 from $1.1175.

The WSJ Dollar Index BUXX, +0.09% a measure of the dollar against a basket of major currencies, was up 0.07% at 86.57.

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