The dollar extended gains and rose above ¥97.50 in Tokyo trading Tuesday, backed by hopes for recovery of the Japanese and U.S. economies as well as by a sharp rebound by Tokyo stocks.
At 5 p.m., the dollar stood at ¥97.70-72, up from ¥96.75-76 at the same time Monday. The euro was quoted at $1.3291-3294, down from $1.3306-3307, and at ¥129.87-90, up from ¥128.74-76.
In early trading, the dollar rose above ¥97 on hopes for a rise in Japanese stock prices following news that Prime Minister Shinzo Abe instructed his team to consider corporate tax cuts in line with the planned sales tax hike next April, market sources said.
“If corporate tax cuts become a key item in the Abe government’s economic growth strategy, it would be positive for the Japanese economy,” a foreign exchange strategist said.
After rising to levels near ¥97.50, the dollar drew selling aimed at locking in profits.
The dollar later attracted renewed demand as Tokyo stocks extended gains toward the close.
“On the back of higher stock prices, currency players were more willing to take investment risks and sold the yen, regarded as a safe-haven currency,” a major trust bank official said.
After European players joined trading in late hours, the dollar accelerated its upswing and rose above ¥97.50.
The dollar was supported by expectations for good numbers in upcoming U.S. economic data, including retail sales in July, due out later Tuesday, the July consumer price index and the July industrial output index, both set for release Thursday, market sources said.
Still, an official at a foreign exchange broker said that as strong readings are projected for U.S. retail sales, the dollar will face heavy selling if the data turn out weak.