Tokyo—The dollar was rangebound against the yen in Asia on Friday as the market awaited a speech by the US Federal Reserve chief amid diminishing expectations for a new round of credit easing. The greenback fetched 77.30 yen in Tokyo morning trade, against 77.45 yen in New York late Thursday. The euro also lacked clear direction, trading at $1.4401 versus $1.4378. The unit was almost flat at 111.35 yen.
The dollar gained ground overnight ahead of a crucial speech by Federal Reserve chairman Ben Bernanke at Jackson Hole later Friday. The greenback was under pressure earlier this week on expectation that Bernanke would hint at fresh stimulus steps to bolster the sluggish US economy.
But market players grew sceptical that he would endorse a further round of quantitative easing, or “QE”, in which a central bank buys assets from banks with electronically-generated cash to pump liquidity into the economy. The previous two rounds of QE since the financial crisis had helped weaken the dollar against other major currencies.
“The dollar was broadly bought back overnight as speculation that Bernanke would suggest QE3 is dwindling,” said Tomohiro Ishikawa, dealer at Chuo Mitsui Trust and Banking. “Market participants are seen staying sidelines today awaiting what Bernanke will actually say,” Ishikawa said.
Hisatsune Kobayashi, general manager of global investment strategy at SMBC Nikko Securities in Japan, told Dow Jones Newswires: “This may be the calm before the storm.”
Although most market players don’t expect US Fed Chairman Ben Bernanke to introduce aggressive monetary easing measures tonight, investors will nevertheless be disappointed if he does nothing at all,” Kobayashi said.
Tokyo’s Nikkei stock average also lacked clear direction, moving around the previous day’s closing levels. “Financial markets, rightly or wrongly, seem to believe that the previous round of Fed stimulus is drying up and that further (quantitative easing) would indeed have an effect on economic activity,” Barclays Capital said in a note. “Disappointing news is likely to favour the US dollar over all other safe havens. Positive news should boost the euro and even the yen (in spite of the risk-on environment),” it said. The dollar was changing hands at 0.7933 against the Swiss franc, little changed from 0.7930 in New York.—AFP
