The dollar extended losses in Asian trade on Wednesday following Iran’s announcement that it had joined the nuclear states, with the market cautious also ahead of United States trade data, dealers said.
The dollar fell to ¥118,03 in Tokyo morning trade from ¥118,21 in New York late on Tuesday.
The US currency was well below a high of ¥118,90 reached at one point in overseas trade after Japan’s central bank chief disappointed traders hoping for clues on when interest rates will rise here.
The euro advanced to $1,2160 from $1,2144 while slipping to ¥143,47 from ¥143,58.
Financial markets will scrutinise data on February’s US trade deficit on Wednesday. The trade gap is expected to narrow to $67,6-billion from a record $68,5-billion, according to economists polled by MarketWatch.
“The forecast of a narrowing of the trade deficit forecast is only after the record deficit last time,” said Masamichi Koike, a general manager in the trading department of Sumitomo Mitsui Banking Corporation.
The dollar was likely to remain under pressure as the deficit would still be huge, though the currency would stay within the range of ¥116-119, he said.
Dealers said that the US currency was sold overnight after Iran announced that it had successfully enriched uranium to make nuclear fuel.
The yen was bought back following a brief sell-off after the Bank of Japan’s monetary policy meeting which left interest rates at close to zero percent.
Bank of Japan (BoJ) governor Toshihiko Fukui said that it was too soon to say when the central bank would begin raising interest rates from zero, providing few fresh leads for the market.
“There is a real risk that the BoJ could go in the September quarter; some commentators are calling for a hike as early as July. Market pricing implies a cash rate of around 1,25%% by the end of 2007,” National Australia Bank currency strategists wrote in a market note.
They said that there was a standoff between speculative players holding sell positions on the yen, who are unlikely to shift views until the BoJ begins raising rates, and institutional investors who are positive on the currency.
They noted a recent market survey of investors showed a record net 58% believe the yen is undervalued, up from 54% in March. – AFP