The yen charged ahead on Wednesday after downbeat US economic data made a US interest rate increase this month unlikely, prompting investors to trim their dollar bets and triggering stop-loss orders in early Asian trade. The dollar was down 0.6 percent at 101.41 yen after dipping as low as 101.20 earlier, its lowest since August 26 and well below last Friday's high of 104.32 yen.
It had tumbled more than 1 percent against its Japanese counterpart on Tuesday. "I still maintain my view that the dollar will trade around 100 to 102 yen until the US presidential election," said Harumi Taguchi, principal economist at IHS Markit in Tokyo. The Institute for Supply Management's non-manufacturing purchasing managers' index fell to 51.4 last month, far short of economists' expectations and the largest one-month drop since November 2008, giving the US Federal Reserve reason to delay increasing interest rates.
The Federal Reserve's labour-market conditions index also fell in August, slipping back into negative territory after a positive reading in July. Nonetheless, San Francisco Fed President John Williams said in prepared remarks late on Thursday that the economy was in "good shape" and that it "makes sense to get back to a pace of gradual rate increases, preferably sooner rather than later." Williams did not directly cite Thursday's US data. Also bolstering the yen was the Sankei newspaper's report saying Bank of Japan policymakers were divided ahead of the central bank's September 20-21 meeting, at which BoJ Governor Haruhiko Kuroda has said the board will conduct a comprehensive assessment of its massive stimulus programme.
The BoJ will refrain from accelerating money printing or deepening negative rates this month as improvements in the economy make it hard to justify again deploying "bazooka"-like big stimulus, Kazuo Momma, who oversaw the bank's monetary policy drafting and global affairs until May, told Reuters on Tuesday.
In a speech on Monday, Kuroda signalled his readiness to further expand stimulus, but he did not provide any explicit hints about aggressively easing policy. "After Kuroda's remarks earlier this week and today's Sankei report, there is some opinion that at the end of the day on September 21, everything will be unchanged, because of disagreement" among BoJ board members on steps," said Naomi Muguruma, senior strategist at Mitsubishi UFJ Morgan Stanley Securities. The euro skidded 0.6 percent to 114.10 yen after falling as low as 113.815 earlier. But it was steady on the day against the dollar at $1.1255.
The dollar index, which tracks the greenback against a basket of six major rivals, edged down 0.1 percent to 94.759 after touching 94.742, its deepest nadir since August 26. The Australian dollar slipped 0.2 percent to $0.7673 after rising more than 1 percent on Tuesday after the Reserve Bank of Australia held interest rates steady at 1.5 percent. Data on Wednesday showed the Australian economy expanded its the fastest annual pace in four years last quarter, to log a quarter century without recession.