Reuters: US Dollar Report: FOREX-Dollar reclaims losses after Japan minister clarifies yen comments

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FOREX-Dollar reclaims losses after Japan minister clarifies yen comments May 21st 2013, 05:55 Tue May 21, 2013 1:55am EDT * Japanese econ minister hopes FX market can find 'balance' * BOJ meeting, Bernanke's Congressional testimony in focus * Dollar index stays near 3-year high By Sophie Knight TOKYO, May 21 (Reuters) - The dollar edged up against the yen on Tuesday after a Japanese minister clarified earlier remarks about the yen's weakness that had toppled the greenback from a 4-1/2-year high against the Japanese currency on Monday. The dollar rose 0.2 percent to 102.69 yen after economics minister Akira Amari said he hoped the yen settles at a level justified by fundamentals and where the impact on imports and exports is balanced. On Monday, the yen fell from Friday's peak of 103.32, its highest level since October 2008, to as low as 102.00 after Amari suggested at the weekend that the yen's strength had been largely corrected. "The weekend comments were misread. He didn't say it in the way it was reported in English," said a Japanese market participant. "But the recent strength (of the dollar) is faster than expected, that's why I think they're trying to bring it down a bit, but the basic stance is that they prefer to maintain a weakening policy in the long term." Half of the 400 Japanese companies questioned in a Reuters survey said the yen has fallen enough, with just 15 percent wanting it to decline further. One third said they would like to see it rebound from its 4-1/2-year low. Still, restraining the dollar's gains against the yen may prove difficult in light of speculation that the Federal Reserve will trim its bond purchases sooner than expected, with the market now focusing on Fed Chairman Bernanke's testimony to Congress on Wednesday for clues of timing. "You can't direct the forex market with words because at the end of the day it comes down to supply and demand," said Junya Tanase, executive director of forex at JPMorgan. Higher yields on U.S. government debt could entice Japanese investors starved of yield at home if the Bank of Japan's massive-bond buying programme eventually forces Japanese debt prices up - although that hasn't happened yet. "It looks like bond investors don't believe in the BOJ's two percent inflation target. I think it's going to be volatile for a while ... but eventually it will be hard to ignore the amount the BOJ is buying and yields will drop," Tanase said. The Bank of Japan, which begins a two-day meeting on Tuesday, is expected to keep policy unchanged but could tinker with its bond-buying plan to curb a recent rise in Japanese yields. Analysts said the yen looked set to resume its recent weakening as Tokyo was committed to easier monetary policy. "We are sticking with the USD-bullish trend and keeping an eye on one of the leading bullish USD currency pairs: USD/JPY. A close below 102.08 in USD/JPY is needed to suggest a reversal to challenge the ongoing bullish USD outlook," wrote Barclays analysts in a note. Against a basket of currencies, the dollar added 0.1 percent from late U.S. levels to 83.841, though it stayed below Friday's peak of 84.371, its highest level since July 2010. The Australian dollar inched up 0.1 percent to $0.9819 after dropping below $0.98 ahead of the release of minutes from the Reserve Bank of Australia's last policy meeting, when it unexpectedly cut rates, sending the Aussie sprawling. On Tuesday, the Aussie stayed close to an 11-month low of $0.9711 struck on Friday, and is now down 5.2 percent this month, also weighed on by concern that China's demand for commodities will not recover to previous heights. Against the yen, it has only chalked up a 3.2 percent gain , since the BOJ announced its audacious easing plan on April 4, compared with the U.S. dollar's 10 percent gain. On Tuesday, it tacked on 0.4 percent to 100.68 yen. "There are plenty of people waiting for the Aussie to break below 100 yen, so it doesn't hang around under there for long," said Soichiro Tsutsumi, vice president of trading at eWarrant Japan Securities. "Some economic indicators are showing Australia is slowing down, but its mining is supporting it ... People have been saying China is about to crash for years, but it never does. We're now looking at a gradual pick-up." Link this Share this Digg this Email Reprints

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