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Dollar gains on rise in T-bill yields

JIJI

The dollar rose above the ¥98 threshold in Tokyo trading Monday on the back of a rise in U.S. Treasury yields stemming from expectations the Fed will scale back its quantitative easing later this year.

At 5 p.m., the dollar was quoted at ¥98.32-33, up from ¥97.96-98 at the same time Friday. The euro was at $1.3109-3114, down from $1.3223-3224, and at ¥128.91-98, down from ¥129.56-58.

The greenback carried over its firmness from Friday’s U.S. trading, where it drew continued purchases on Fed Chairman Ben Bernanke’s remarks Wednesday that the U.S. central bank could begin to slow the pace of asset purchases under its third round of quantitative easing, or QE3, later this year.

The dollar climbed to around ¥98.70 toward noon on purchases prompted by a key U.S. long-term Treasury yield’s rise to around 2.6 percent in off-hours trading.

The benchmark Treasury yield rose to 2.53 percent in Friday’s U.S. trading, the highest level in 22 months, reflecting Bernanke’s remarks following a policy-setting Federal Open Market Committee meeting.

The market’s expectations for wider interest rate gaps ahead between the United States and Japan have underpinned the dollar versus the yen, market sources said.

“Dollar buying since the FOMC meeting last week has helped diminish the dollar’s downside concerns,” said a foreign exchange analyst.

The landslide victory by the Liberal Democratic Party in the Tokyo Metropolitan Assembly election Sunday “was not surprising to the market but gave relief that led to dollar buying against the yen,” said an official of a foreign exchange broker.

The dollar’s topside turned heavy in the afternoon when the Nikkei 225 stock average extended its losses.

Profit-taking from individual investors hit the currency market after sluggish Chinese and other Asian stock markets stoked concerns about the global economy and gave rise to a risk-off mood, many traders said.

Japanese exporters also sold the dollar vis-a-vis the yen ahead of the end of the month.