The dollar was firmer around ¥121.20 in Tokyo trading on Monday, continuously supported by the Bank of Japan’s surprise decision Friday to cut interest rates below zero, while traders were waiting to see a series of key U.S. economic data this week.
At 5 p.m., the dollar stood at ¥121.21-21, up from ¥120.63-64 at the same time Friday. The euro was at $1.0845-0845, down from $1.0896-0897, and at ¥131.44-46, little changed from ¥131.46-47.
Following the dollar’s surge from levels below ¥119 sparked by the BOJ’s additional monetary easing step, the dollar-yen rate was mainly subject to position-adjustment transactions on Monday, traders said.
The U.S. currency advanced as high as around ¥121.70 in overseas trading on Friday, also taking heart from data showing that the U.S. economy grew at an annualized rate of 0.7 percent in price-adjusted real terms in October to December.
“The dollar seems to have hit its current topside,” said an official at a currency margin trading service provider.
Despite the BOJ action, interest rate gaps between Japan and the United States “did not expand as expected,” due to a coincidental fall in U.S. Treasury yields, keeping the dollar’s ascent against the yen in check, said an official at an asset management firm.
“Improvements in U.S. economic indicators are necessary” for the dollar to gain further ground, the official added.
Sluggish Chinese stock prices on Monday also appeared to pressure the dollar’s upside versus the yen, amid lingering concerns over the Chinese economy and oil prices, traders said.
“This week, we will see where the dollar-yen rate settles for now,” following the dollar’s surge on the BOJ’s adoption of negative rates, an official at a major Japanese bank said.
A wait-and-see mood is expected to spread in the currency market this week, with U.S. jobs data for January to be released on Friday. Other closely watched U.S. data include the Institute for Supply Management’s manufacturing index for January, due out later on Monday.