The dollar traded in a narrow range slightly below ¥102 in Tokyo trading Friday, due to a lack of major trading incentives and ahead of the weekend.
At 5 p.m., the dollar stood at ¥101.92-92, up from ¥101.78-78 at the same time Thursday. The euro was at $1.3608-3612, down slightly from $1.3616-3617, and at ¥138.70-72, up from ¥138.59-60.
In overseas trading overnight, the dollar briefly rose to around ¥102 thanks to a rise in U.S. long-term interest rates following favorable economic data, including the Federal Reserve Bank of Philadelphia’s manufacturing index for June.
“A gradual increase in U.S. long-term interest rates prompted dollar buying for yen,” an official at a foreign exchange margin trading service firm said.
After moving around ¥109.90 in early Tokyo trading, the dollar fell to around ¥101.80 due to falls in Tokyo stock prices. But the U.S. currency cut losses soon thanks to the resilience of Tokyo stocks.
The dollar was later stuck in a narrow range around ¥101.85 as the key stock indexes were range-bound around the previous day’s closing levels.
“Ahead of the weekend, the dollar was hit by position-adjustment selling,” an official at a foreign exchange broker said.
The dollar’s downside was limited thanks to solid stock performances in Japan and abroad, market sources said.
Still, a major Japanese bank official said that “there were no factors to encourage stepped-up dollar purchases.”
As daytime market volatility has been low in recent sessions, investors tend to lock in profits on any small rise in the dollar, an official at another foreign exchange broker said.
Market sources said the dollar’s topside was capped by caution over overheating of the U.S. stock market as well as heightened tensions in Iraq and Ukraine.
An official at another major Japanese bank said the dollar has been under downward pressure as a U.S. Federal Reserve Board statement issued after its policy-setting meeting on Wednesday and remarks made by Fed Chair Janet Yellen at a press conference after the meeting was taken as dovish.
By contrast, one market source said the Fed meeting failed to provide a clear direction for the currency market, leaving the market in a stalemate.
JGBs firmer on weaker stocks
Japanese government bonds firmed Friday, backed in part by Tokyo stocks’ downturn.
The lead September futures contract on 10-year JGBs climbed 0.09 point from Thursday to 145.43 on the Osaka Exchange. Volume dropped to 15,128 contracts from 22,813.
In late interdealer trading in cash JGBs, the yield on the latest 334th 10-year issue with a 0.6 percent coupon stood at 0.58 percent, down from 0.585 percent late Thursday.
The key futures contract opened on a firm note, with investor sentiment brightened up to some extent by buybacks in superlong-term cash bonds, an official at a foreign-affiliated securities firm said.
After ending the morning session modestly higher, the September contract maintained its strength in the afternoon, as the Nikkei Stock Average lost steam and sank into the negative territory toward the closing.
