Dollar slides below ¥98 threshold


The dollar slid below ¥98 in Tokyo trading Monday, breaching the threshold for the first time since June 27, on speculation that the U.S. Federal Reserve will keep its ultraloose monetary policy in place longer than expected.

At 5 p.m., the dollar stood at ¥97.95-97, down from ¥98.72-72 at the same time Friday. The euro was at $1.3268-3268, down from $1.3287-3288, and at ¥129.99-130.01, down from ¥131.17-18.

The dollar-yen rate was overshadowed by the possibility that the Fed, at a policy-setting meeting this week, will revise its “forward guidance” on interest rates to suggest that the U.S. central bank could keep its policy rate target very low for a longer period, traders said.

“Dollar-long positions had accumulated since the House of Councilors election (on July 21), and traders rushed to close those positions, leading to the steep fall of the dollar,” an official at a major foreign bank said.

The U.S. currency temporarily fell below ¥97.70 around noon.

Remarks from Bank of Japan Gov. Haruhiko Kuroda gave the dollar a little lift in the afternoon, but the positive impact soon diminished as risk-averse sentiment spread in the currency market after Japanese stocks accelerated their dive while Chinese stocks were also weak, traders said.

Kuroda said in a speech that the BOJ has been steadily implementing its new quantitative and qualitative easing policy, adopted in early April. He renewed the central bank’s commitment to achieving its inflation target of 2 percent.

After European players joined trading in late hours, the dollar attracted some buybacks and hovered around ¥98.

Market participants are focusing on a two-day Federal Open Market Committee meeting from Tuesday.

The FOMC meeting is expected to be led by opinions for reinforcing the forward guidance to ease concerns about an early exit by the Fed from the current easing policy, said an official at a foreign exchange margin trading service provider.

“The dollar would bounce back only if the FOMC skips an easing step and U.S. jobs data due out late this week exceed market expectations,” an official at a major Japanese bank said.