The dollar extended losses against the yen in Asian trade Wednesday, after overnight remarks by Federal Reserve Chairwoman Janet Yellen surprised on the dovish side.
The dollar USDJPY, -0.16% was at ¥118.68, compared with ¥118.89 late Tuesday in New York.
During her first day of testimony to Congress, Yellen took note of an improving economy and reminded investors that the central bank is getting closer to raising borrowing costs for the economy. But she said the timing of the next interest-rate increase depends on upcoming economic data and international developments.
During the Asian session, the greenback fell to as low as ¥118.62 with Japanese exporters selling the U.S. currency ahead of the end of the month regular settlement for their commercial transactions. Short-term players who bought the dollar ahead of Yellen’s testimony appeared to engage in selling.
Kosuke Hanao, head of FX at HSBC in Tokyo, said currency market participants were inclined to expect slightly hawkish comments in Yellen’s remarks after upbeat jobs data. But she “merely expressed it could go both ways, and proved she communicated well.”
“I feel she is merely saying in a proper fashion that the decision to raise rates would come after confirming the momentum of the economy,” although a June rate increase is now up in the air, drawing investor attention to economic indicators next week,” said Shigetake Nakayama, senior manager at the foreign exchange trading department at the Bank of Tokyo-Mitsubishi UFJ
“We still need more time to see whether (the dollar) breaks higher or lower,” against the yen, said Nakayama.
Investors are now shifting their attention to the U.S. jobs report and other economic data next week.
The Australian dollar strengthened against rival currencies after upbeat China data indicated a brighter future ahead for the China-linked commodity exporting nation. The Aussie AUDJPY, +0.57% rose to as high as ¥Y93.59, its highest since Jan. 28, before stabilizing at ¥93.56.
The preliminary HSBC China Manufacturing Purchasing Managers’ Index, a gauge of nationwide manufacturing activity, rose to 50.1 in February compared with a final reading of 49.7 in January. A reading below 50 indicates a contraction in manufacturing activity from the previous month, whereas a reading above indicates expansion.
Among other currency pairs, the euro EURUSD, +0.23% was at $1.1345 from $1.1343 and was at EURJPY, +0.10% ¥134.69 from ¥134.85.
The WSJ Dollar Index BUXX, -0.29% a measure of the dollar against a basket of major currencies, was down 0.18% at 85.32.
Source: MarketWatch
