The dollar sagged to levels around ¥120.60 in Tokyo trading on Tuesday, dragged down by falls in oil and stock prices following their recent rallies.
At 5 p.m., the dollar stood at ¥120.62-63, down from ¥121.21-21 at the same time Monday. The euro was at $1.0902-0903, up from $1.0845-0845, and at ¥131.52-53, up from ¥131.44-46.
The greenback moved in the range of 120.90-¥121.00 in the early morning after dropping as low as ¥120.67 in New York trading overnight amid U.S. stocks’ lackluster performance on weak Chinese and U.S. economic data, traders said.
But the U.S. currency gradually extended losses later in Tokyo, sinking below ¥120.40 at one point in the afternoon.
Position-adjustment selling of the dollar against the yen strengthened in the face of falling crude oil prices and sluggish movements in stock prices, an official at a foreign exchange brokerage house said.
Weaker-than-expected demand for 10-year government bonds in a Ministry of Finance auction also prompted sales of the dollar vis-a-vis the yen, following the Bank of Japan’s decision Friday to introduce negative interest rates, the official added.
Another factor pressuring the dollar’s topside appeared to be the yen’s appreciation against the Australian dollar on a “dovish” policy statement by the Reserve Bank of Australia, said an official at a currency margin trading service provider.
While the dollar’s downside versus the yen seems to have been consolidated by the BOJ’s adoption of negative interest rates, crude oil prices remain at low levels and concerns persist over the Chinese economy.
Under the circumstances, “few are willing to buy the dollar aggressively,” an official at a Japanese bank said.
Following a brief jump to around ¥121.70 on the BOJ action, the greenback is now viewed as unlikely to extend gains above ¥121 for the time being, due to position-adjustment selling.
Growing attention is now being paid to Friday’s release of U.S. jobs data for January. For the dollar to resume an ascent against the yen, “the U.S. economy’s recovery needs to be more visible, and an additional rate hike by the U.S. Federal Reserve more viable,” another bank official said.