On Wednesday, the greenback lost its grip on prior gains against the yen, remaining under pressure after North Korea fired a ballistic missile into the sea in advance of a summit between U.S. and Chinese leaders.
Just a day before U.S. President Donald Trump and his Chinese counterpart Xi Jinping meet for talks on economic and security issues, Pyongyang’s test-fire came and will include persuading North Korea to curb its arms development.
However the perceived safe-haven Japanese currency tends to gain in times of geopolitical tension or risk aversion, the greenback got some support from Japanese importers on a “gotobi” date – the fifth day of the month and dates that are multiple of five- on which accounts are traditionally settled.
“Today, there is real demand for the dollar, on ‘gotobi,’ so its downside should be limited,” said Kaneo Ogino, director at foreign exchange research firm Global-info Co in Tokyo.
However, the concerns regarding the approaching China-U.S. summit undermined the dollar, which is also under pressure from increasing speculation that Trump will face challenges implementing his promised growth-boosting policies in the wake of his administration’s failure to pass healthcare reform.
“People want to wait and see how Trump can carry out his promises when it comes to infrastructure” and tax reform, Ogino added.
The dollar inched down 0.1% to 110.64 yen , off from a session peak of 110.92 and well below last Friday’s 10-day high of 112.19 yen.
The dollar index, which tracks the U.S. currency against a trade-weighted basket of six peers, declined slightly on the day at 100.52 (DXY), as falling U.S. Treasury yields also gave investors little incentive to buy the dollar.
The benchmark U.S. Treasury yield touched its lowest levels since February in overnight trade. It last stood at 2.349% (US10YT=RR) in Asian trading, not far from its U.S. close of 2.350%. It had been trading at levels above 2.40% as recently as Monday.
Yields inched down as investors pursued safety, even as investors expect additional interest rate increases by the Fed Reserve this year.
On Tuesday, solid U.S. data reinforced those expectations, indicating the country’s trade deficit dropped more than expected in February, while separate figures indicated factory orders increased for the 3rd straight month.
The previous week, Trump ordered a probe of the causes of U.S. trade deficits and tough measures for countries that evaded import duties.
“The foreign exchange market’s main focus remains whether or not Trump can carry out his policies, and whether the U.S. economy will stay strong enough for the Fed to stick to the path of rate hikes,” said Kumiko Ishikawa, FX market analyst at Sony Financial Holdings.
“Therefore, this week’s U.S. jobs figures are still very important,” she said.
Economists polled predict the U.S. economy will have added 180,000 jobs in March, according to the report.
Meanwhile, the euro inched up a little to $1.0674 after plumbing a three-week low of $1.0636 on Tuesday.
The Australian dollar also sneaked higher to $0.7564 , dragging away from a three-week low of $0.7545 hit in the prior session when investors pared bets that the Reserve Bank of Australia would increase rates this year.
On Tuesday, Australia’s central bank held rates steady for an eighth month as generally expected, but expressed concerns over increasing property prices and weak employment situations.
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