The dollar retreated to around ¥98 in Tokyo trading Monday following a U.S. government report on international currency policies and weaker than expected Chinese economic data.
At 5 p.m., the dollar stood at ¥98.15-16, down from ¥99.29-29 at the same time Friday. The euro was at $1.3073-3075, slightly up from $1.3063-3064, and at ¥128.33-34, down from ¥129.69-73.
The greenback plunged below ¥98 in Oceania trading hours early Monday morning, after the U.S. Treasury Department said in a semiannual report to Congress on Friday that it will “continue to press Japan to . . . refrain from competitive devaluation (of the yen) and targeting its exchange rate for competitive purposes.”
The U.S. currency was also weighed down by weaker than expected readings in American retail sales data for March and the University of Michigan’s consumer sentiment index for April, both released Friday.
The Treasury report followed the dollar’s surge from around ¥80 to near ¥100 over the past five months, on hopes for aggressive easing by the Bank of Japan.
Despite the market’s nervous reaction, analysts said the Treasury report was generally in line with expectations and did not necessarily attack Japan on the currency issue. “It seems that the report came when traders were waiting to sell the dollar to lock in profits and they used the report as a cue,” said an official at a foreign securities firm.
After rebounding as high as around ¥98.70 later in the morning, the greenback briefly sank to levels close to ¥97.50 in the afternoon on weak Chinese economic output data in the January-March quarter and dips in Tokyo stock prices. China’s real gross domestic product growth decelerated to 7.7 percent on a year-on-year basis from 7.9 percent in October-December.
Still, the U.S. currency later climbed back to levels just above ¥98. “Many traders were ready to buy on dips,” an official at a major Japanese bank explained.
Although the dollar’s upside will be capped by cautiousness prior to a two-day meeting of Group of 20 finance ministers and central bank governors from Thursday, “there is no change in market expectations of falls in the yen over the medium to long term,” one trader said.