SINGAPORE- The dollar began the last quarter of the year in the ascendant on Monday due to prospects of US interest rates staying higher for longer, and the yen’s slide to a near one-year low put traders on watch for intervention by Japanese authorities.
Currency moves were subdued in early Asia trade with parts of Australia out for a holiday and China away for its Golden Week, though analysts said a narrowly-averted US government shutdown could bring some relief to markets.
The yen eased to 149.83 per dollar, its weakest in over 11 months, moving ever close to the 150 mark that some traders believe could trigger intervention by Japanese authorities, similar to their action last year, to support the currency.
“Intervention risks could limit, if not partially reverse yen losses; especially as dollar/yen dangerously flirting with 150 prompts push-back from Tokyo,” said Vishnu Varathan, head of economics and strategy at Mizuho Bank.
“But the intent of the (Ministry of Finance) is not a clear line in the sand. Nor is the Bank of Japan (BOJ) likely to buckle under yen pressures to concede a hawkish overhaul at pain of far more lasting economic damage.”
A summary of opinions at the BOJ’s September meeting out on Monday showed policymakers discussed various factors that must be taken into account when exiting ultra-loose policy.
“They’re wary of tightening too early and squashing… a rise in inflation and growth,” said Jarrod Kerr, chief economist at Kiwibank. “They deserve to be cautious, though.”
In the broader currency market, the euro lost 0.06 percent to $1.05665, after ending the previous quarter with a 3 percent fall, its worst performance in a year.
Sterling was last 0.14 percent lower at $1.21875, having similarly slid nearly 4 percent against the dollar in the third quarter.
The US dollar index however, stood not too far from its recent 10-month high and was last at 106.27, after clocking its best quarterly performance in a year last month thanks to persistently hawkish Federal Reserve rhetoric.
“I’d rather be in dollars at the moment than euros or pounds or others,” said Kiwibank’s Kerr. “I think the dollar will find a bit more support.” – Reuters
