By Virginia Harrison, MarketWatch
SYDNEY (MarketWatch) — The dollar strengthened in Asian trading hours Monday, with the Japanese yen losing ground as the ruling party there prepared to select a new prime minister.
The dollar USDJPY -0.11% edge up to ¥76.74, compared to ¥76.71 yen in North American trading late Friday.
Japan is on track to name its fifth prime minister in six years on Monday, after incumbent Naoto Kan resigned last week.
The battle to lead the ruling Democratic Party of Japan — and the nation — has reportedly boiled down to Economic Minister Banri Kaieda and former foreign minister Seiji Maehara, with the vote due to take place later Monday. Read more on Japan’s leadership battle
“The transition could derail confidence in the government’s ability to address the risks surrounding the region, as policy makers come under increased scrutiny,” said David Song, currency analyst at the DailyFX.
“In turn, the central bank may have little choice but to step up its efforts to shore up the economy, and we may hear the Bank of Japan announce additional measures next month as the region struggles to recover from the devastating earthquake and tsunami from earlier this year,” Song said.
Dollar edging up
The dollar index DXY -0.18% which measures the greenback against a basket of six other currencies, rose to 73.836, from 73.825 in North American trading late Friday.
The dollar had weakened Friday after Federal Reserve chief Ben Bernanke said at a conference in Jackson Hole, Wyo., that the Federal Open Market Committee (FOMC) would consider its options on monetary policy at its next meeting in September.
Markets are now looking to the release of minutes from the previous FOMC meeting, due out Tuesday.
“The FOMC minutes will reveal the thinking behind the decision to keep the funds rate unchanged until mid-2013,” Joseph Capurso, currency strategist at the Commonwealth Bank of Australia, wrote in a research note.
“The longer the U.S. economy remains weak, the more likely the FOMC will implement further policy easing, and the U.S. dollar stays weak. We do not expect a large weakening of the U.S. dollar. Volatility and the increased cost of U.S. dollar funding are supporting the U.S. dollar.”
The euro EURUSD +0.30% fell to $1.4479, from $1.4483 in North American trading late Friday.
However, the British pound GBPUSD +0.27% edged up to $1.6345, from $1.6341 in North American trading late Friday.
Virginia Harrison is a MarketWatch reporter based in Sydney.
