The dollar was caught in a ”tug-of-war” against the yen in Asian trade on Monday as the market focused on the prospects for monetary tightening in both the United States and Japan, dealers said.
The US currency, however, was supported against the euro by expectations that eurozone interest rates are set to stay put for now, they added.
The dollar stood at 117,94 yen in afternoon trade in Tokyo, up slightly from 117,84 yen in New York late on Friday.
The euro was at $1,1894 after 1,1903 and at 140,25 yen, nearly unchanged from 140,27.
”We cannot see a clear direction for the dollar,” said Nobuaki Kubo, a senior trader at Resona Bank.
”Things are unclear, with many people focused on when the Bank of Japan will declare that Japanese deflation is over and end the quantitative easing policy [of flooding the banking system with cash],” he added.
However expectations for further rises in US interest rates continued to dominate the market, limiting the dollar’s fall against the yen and allowing it to rise against the euro, Kubo added.
”These market themes are forming what appears to be a tug-of-war between the dollar and the yen, and people are keeping their hands off from making major moves and only adjusting their positions for now,” he added.
Technical factors were also putting the reins on the dollar.
”The speculative community is no longer short [holding sell positions] on the dollar overall and so further gains in the dollar, while likely, will be harder won,” National Australia Bank strategists wrote in a market note.
The yen began rising late on Friday after strong Japanese machinery-orders data fueled speculation that the Bank of Japan will have to end its current stimulative monetary policy soon.
The Bank of Japan has previously signalled that an end to its quantitative easing policy of pumping cash into the financial system is likely sometime from April although analysts believe actual interest rate rises are further off.
The Japanese government reported that the core measure in December of the nation’s machinery orders rose 6,8% on a month-on-month basis, outstripping expectations of a 1,5% monthly rise.
For the rest of the week, participants will watch for a number of trading leads, including new Federal Reserve chairperson Ben Bernanke’s first appearance before Congress on Wednesday and Thursday.
”Players will be also sensitive to comments from Japanese policymakers on the monetary policy outlook,” Kubo said. – Sapa-AFP