The dollar bounced back to levels just below ¥98 in Tokyo trading Thursday, mainly supported by short covering, while the euro staged a relief rally after Italy avoided a government collapse.
At 5 p.m., the dollar stood at ¥97.84-88, up from ¥97.36-38 at the same time Wednesday. The euro was at $1.3606-3607, up from $1.3528-3529, and at ¥133.11-14, up from ¥131.71-74.
The greenback got added lift in the late afternoon after rising as high as around ¥97.70 in the morning, when the key Nikkei 225 average showed resilience following a dismal opening.
Traders appeared to set aside concerns over the U.S. government shutdown for now.
“There is a strange sense of relief spreading in the market,” an official at a bank-affiliated securities firm said, noting that some emerging economy currencies drew buying interest.
Still, traders seem to be increasingly concerned that the U.S. government shutdown, which began after Congress failed to pass a budget bill Monday, could be prolonged.
An Oct. 17 deadline is also looming for congressional negotiations to expand the U.S. government’s borrowing authority.
“Uncertainty will remain for the time being, and we have no choice but to wait and see when Democrats and Republicans walk up to each other,” an official at a major Japanese bank said.
In overnight New York trading, the dollar dropped to a one-month low of ¥97.15, dampened by weaker than expected readings in Automatic Data Processing Inc.’s U.S. private-sector employment report for September.
“The fiscal problems could badly affect the overall employment situation if the U.S. government holds back on hiring,” a bank-linked brokerage official said.