The dollar rose above ¥97 in Tokyo trading Tuesday thanks to buybacks triggered by a rebound in Tokyo stock prices, but its topside was capped by concerns over the continued U.S. political stalemate.
At 5 p.m., the dollar stood at ¥97.08-10, up from ¥96.91-92 at the same time Monday. The euro was at $1.3570-3571, down from $1.3579-3580, and at ¥131.75-82, up from ¥131.60-62.
In early trading, the dollar was weak around ¥96.60-70, the lowest level in about two months, pressured by selling on worries about the U.S. government deadlock over the fiscal 2014 budget and debt ceiling, market sources said.
“Due to the continued confrontation between U.S. Democrats and Republicans, investors are increasingly refraining from active trading and the U.S. currency tends to face selling to unwind long positions,” an official at a major Japanese bank said.
After Tokyo stocks turned higher in the afternoon, the dollar attracted buybacks and rose above ¥97.
“Despite the U.S. fiscal deadlock, many market participants still believe that U.S. lawmakers will move to avert a government default,” an official at another major Japanese bank said, adding that the dollar is apparently drawing buying on dips.
But the dollar’s upside was limited at levels above ¥97.
One market source said it is difficult to take fresh positions actively as long as the U.S. government shutdown continues.
With no prospects for a solution to the U.S. budget impasse, “investors have no choice but to reduce risk exposure for now,” an official at a major trust bank said.
Market participants are now waiting for testimony by U.S. Treasury Secretary Jacob Lew at a hearing of the Senate Finance Committee on Thursday.