The dollar was sharply weaker around ¥118 in Tokyo trading on Thursday, following an overnight plunge in overseas trading on sluggish U.S. nonmanufacturing activity data.
At 5 p.m., the dollar stood at ¥117.95-95, down from ¥119.97-97 at the same time Wednesday. The euro was at $1.1079-1081, up from $1.0906-0907, and at ¥130.69-70, down from ¥130.83-86.
The greenback dived to levels slightly above ¥117 in New York trading Wednesday after the U.S. Institute of Supply Management said its nonmanufacturing business index for January fell to the lowest level in about two years.
In Tokyo trading Thursday, the U.S. currency pared the losses in the early morning and drifted in a narrow range around ¥118 for the rest of the day, supported by some buybacks, traders said.
The dollar-yen rate “seems to be seeking levels where it settles for now,” said an official at a major Japanese bank, adding that traders were “reluctant to move actively” ahead of Friday’s release of key U.S. jobs data for January.
The weak nonmanufacturing data came on top of concerns over sluggish oil prices and high volatility in stock markets, fueling risk aversion among investors, traders said.
The dollar was also pressured by reported remarks by William Dudley, president of the Federal Reserve Bank of New York, suggesting that he is cautious about an additional interest rate hike by the U.S. central bank, traders said.
Although the dollar shot up as high as around ¥121.70 following the Bank of Japan’s decision last Friday to introduce a negative interest rate policy, it has given up the gains completely.
“The impact of the BOJ’s adoption of a negative interest rate policy has faded already,” said an official at a currency margin trading service provider.