The dollar reversed its early weakness and traded above ¥101.60 in late Tokyo trading Wednesday, while players gradually retreated to the sidelines ahead of the U.S. Thanksgiving holiday Thursday.
At 5 p.m., the dollar was at ¥101.67-71, up from ¥101.47-48 at the same time Tuesday. The euro stood at $1.3576-3578, up from $1.3539-3540, and at ¥138.03-06, up from ¥137.38-42.
The dollar sank below ¥101.20 in early trading after the U.S. Conference Board’s consumer confidence index for November, announced Tuesday, dropped to a seven-month low.
Later in the morning, the greenback bounced back to levels around ¥101.40, backed by month-end demand from Japanese importers, traders said.
The U.S. unit expanded its gains to top ¥101.50 in the afternoon as the euro briefly jumped to around ¥138.15, its highest level in four years and one month, on the back of what appeared to be a rush of speculative buying amid thin trading, they said.
Also on the back of the euro’s surge was news that Germany’s two major political parties have agreed to form a grand coalition.
The dollar continued to be underpinned by risk-on sentiment, analysts said, noting that the U.S. Dow Jones industrial stock average has kept on rewriting its record closing high.
But an official at a major Japanese brokerage said that “without fresh dollar-buying incentives, it would be difficult for the U.S. currency to rise above ¥102.”
The dollar has been top-heavy after hitting a six-month high around ¥101.90 on Monday. Technical charts indicate that the dollar is likely to meet with heavy selling around ¥101.70-80, analysts said.