The dollar was stuck against the euro and the yen on Tuesday, hanging near recent lows hit on worries about a festering US current account deficit and the prospect of US interest rates remaining low.
Traders in Tokyo were cautious about selling the dollar amid intervention concerns, with some suspecting Japan may have lowered its target level for stepping into the market after the dollar fell to another three-year low against the yen on Monday.
Noting that the effects of a sudden spike up in the dollar versus the yen on Monday on suspected intervention had been fleeting, dealers said that the aim behind such support may have shifted in light of the greenback's overall decline.
"If it is intervention it doesn't seem to be the type that is aimed at defending the dollar at (a certain) level. By the looks of it, the purpose is to slow the dollar's general fall," said Shogo Nagaya, a manager at Nomura Trust.
The dollar was around 106.15 yen slightly above the three-year low of 106.06 and a touch below late US trade levels.
Stalled on concerns about option-selling at $1.27, the euro was perched at $1.2685. It was within sight of the record high of $1.2697 hit in early European trade on Monday, and little changed from late US trade. Sterling clocked a fresh 11-year high against the embattled greenback, peaking at $1.8105 in Tokyo trading.
The dollar's slide on Monday was triggered in part by comments from US Federal Reserve Board Governor Ben Bernanke that the Fed was justified in holding interest rates at 45-year lows even though the US economy seems to have improved.
The prospect of interest rates remaining low is likely to encourage investment outflows from the dollar to higher-yielding currencies at a time when the United States is desperate for capital inflows to cover its mammoth current account deficit.
Meanwhile, Japanese officials continued their jawboning against dollar-selling. Both Japanese Finance Minister Sadakazu Tanigaki and Zembei Mizoguchi, vice finance minister for international affairs, said Japan would act against sudden or speculative currency moves.
Toyota President Fujio Cho, meanwhile, said that he felt the yen was "a bit too strong" in light of Japan's economic fundamentals.
Comments
Comments are closed.