Dollar falls as positions tweaked

The dollar fell against major currencies in thin trade on Wednesday as some dealers and speculators closed long dollar positions ahead of holidays in Japan and the United States. Japanese exporters sold the dollar on wariness about its downside risks, such as the slowing US economy and the erosion of the currency's interest rate advantage.
The initial drop against the yen then forced a wider range of market participants to temporarily clear long dollar positions, traders said. "The fall in the dollar that we have seen today is purely caused by position-adjustments before the holidays, given rising positions in the yen carry trade," said a trader at a Japanese bank.
The yen has fallen prey to low volatility in the market over the past six months, making carry trades profitable for investors and speculators. In such trades, the low-yielding yen has been borrowed to buy a higher-yielding currency, on expectations that the Bank of Japan will raise interest rates only slowly from the current 0.25 percent.
Market players expect the Federal Reserve to keep rates at 5.25 percent for now, though many believe that the next policy move will be a rate cut rather than a hike. "It remains unclear if and when the Fed will lower rates, but many players now believe there is no upside to interest rates," said Kaoru Kondo, chief forex analyst at Fisco.
The dollar slipped to 117.60 yen from around 117.90 yen late in US trade. The euro dipped to 151.30 yen from around 151.45 yen, but stayed in sight of a record high of 151.68 yen hit on electronic trading platform EBS at the start of the week.
The single European currency climbed to $1.2865 from around $1.2845. US markets will be closed for the Thanksgiving holiday on Thursday, while Japanese markets will be shut for the Labour Thanksgiving holiday.
The dollar came under pressure on Tuesday as the White House lowered its forecast for US economic growth this year and next, saying the economy is moderating. "The dollar is increasingly top-heavy with players gradually lowering the upper end of their trading ranges," said a trader at a Japanese bank.