The dollar was almost flat against the yen on Thursday, with investors reluctant to take strong positions given a lack of fresh cues.
The U.S. dollar USDJPY +0.06% inched down to ¥101.45 from ¥101.48 late Wednesday in New York.
Despite the absence of direct trading cues, geopolitical concerns, such as the Ukraine situation, are still weighing heavily on the minds of market participants. In the latest development, pro-Russian separatists shot down two Ukrainian ground attack planes Wednesday over a town close to where Malaysia Airlines Flight 17 crashed last week.
But moderate gains in European stock markets overnight suggest the risk-aversion mood is not growing.
Against that backdrop, the dollar-yen continued to remain in a narrow range and had a muted reaction to a bigger than expected monthly trade deficit in Japan.
An ordinary currency market pattern is buy or sell on expectations and then lock in profits after verifying the fact, but extremely low volatility in recent days has made jittery investors reluctant to take positions on expectations, said Daisaku Ueno, chief forex strategist at Mitsubishi UFJ Morgan Stanley Securities.
Referring to low volatility in the dollar-yen trading pair, “I think much more concrete evidence is needed to help activate a market which is experiencing a longstanding stalemate,” said Mr. Ueno, adding that the market participants may not be able to get a clear sense of direction for the currency trade pair until they confirm diverging monetary policy between the U.S. and Japan as early as the coming autumn.
In contrast, other currency pairs in the Asia Pacific region have recently proven themselves more vulnerable to economic data and events, in a sign that investors are shifting their money away from the dollar-yen’s stubbornly low volatility.
The Australian dollar AUDUSD -0.12% went up to as high as $0.9472 at one point, after a solid reading in the HSBC China Manufacturing Purchasing Managers’ Index, a gauge of nationwide manufacturing activity.
Currencies closely tied to growth in China such as the Aussie dollar are bought when solid data from the world’s second-largest economy is released.
Also on Thursday, the New Zealand dollar NZDUSD -1.25% fell to a low of $0.8581 after the country raised interest rates for the fourth time this year but signaled it wouldn’t introduce further increases until the impact of the latest rate increase has been assessed.
Elsewhere, the euro EURUSD +0.10% fell to $1.3460 from $1.3462, while the common currency weakened to Y136.55 from Y136.62, ahead of the release of July euro zone PMI data.
The WSJ Dollar Index XX:BUXX +0.05% , a measure of the dollar against a basket of major currencies, was up 0.06% at 73.17.
Source: MarketWatch
