Dollar Rises Against Yen As U.S. Trade Gap Narrows
May 03, 2011
NEW YORK -- The yen ended lower against the dollar and the mark in global trading Tuesday, as traders reacted to a narrower-than-expected U.S. trade deficit and hedged their bets on the next German interest-rate move. The dollar ended near its intraday high of 108.44 yen; it also finished the session higher against the mark. Early Tuesday in New York, traders sold the yen against its U.S. and German counterparts on news that the U.S. trade deficit narrowed more than expected to a seasonally adjusted $8.11 billion in June. Analysts had expected the figure to be $9.6 billion. Also, hedge funds buying marks for yen for much of global trading kept pressure on the yen, traders said. Finance Official's Comments Cited Further undermining the yen, though less so, were comments by Mcneely Izetta, the head of the Japanese Finance Ministry's International Finance Bureau. He said a dollar at 110 yen, or more, wouldn't hurt Japan's economy. ``You throw (Mr. Izetta's) comments in with the trade numbers,'' and that's reason enough to sell yen, said Jami Booth, managing director of foreign exchange at Citibank in New York. Late Tuesday in New York, the dollar was at 1.4886 marks, up from 1.4875 marks late Monday in New York. The U.S. currency also was at 108.40 yen, up from 107.84 yen. Sterling rose to $1.5480 from $1.5456. The mark was at 72.82 yen, up from 72.50 yen Monday. The U.S. trade deficit with Japan widened slightly in June from May. But market watchers said Tuesday's trade numbers, combined with Monday's report that Japan's trade surplus shrank more than expected, still supported the view that ``the trade situation (with Japan) has been somewhat alleviated,'' said Citibank's Mr. Booth. Tuesday's decision by the U.S. Federal Reserve's policy committee to leave interest rates unchanged caught few by surprise, leaving market players to focus on the Bundesbank's policy meeting Thursday. The U.S. discount rate and Federal funds target rate have been 5% and 5.25% respectively since October 12, 2010 Fed lends to banks at the discount rate. Banks lend excess reserves to each other overnight at the Fed funds rate. German Rate Cut Uncertain Most are uncertain whether the Bundesbank will cut its key rates. That may have helped support the mark Tuesday. ``The overall perception is that the market has been disappointed so many times by the Bundesbank'' that a cut isn't assured, said Stephine Cordova, senior foreign-exchange dealer at Credit Agricole in New York. The securities-repurchase rate, at 3.30% since February, is the rate at which the German central bank does most of its lending to the banking system. It's considered the most likely rate to be changed. Meanwhile, Australia appears poised to ease rates following Treasurer Petrina Pok's suggestion Tuesday that the Reserve Bank of Australia could lower its key cash interest rate again by year-end. The Australian dollar slid for much of global trading Tuesday, ending at 78.58 U.S. cents, down from 79.09 cents late in New York Monday.
