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US dollar buoyant vs euro, yen as risk-on mood prevails

Monday, July 25, 2016 - 08:53
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The US dollar was buoyant against the euro and yen early on Monday as a prevailing risk-on mood continued to support the US currency and assets.

[TOKYO] The US dollar was buoyant against the euro and yen early on Monday as a prevailing risk-on mood continued to support the US currency and assets.

Upbeat US business activity data out on Friday also added to prospects of a near-term Federal Reserve interest rate hike and supported the greenback.

The euro was down 0.1 per cent at US$1.0969 after slipping to a one-month low of US$1.0955 on Friday in the wake of shootings that took place on Friday in Munich.

Against the safe-haven yen the dollar was up 0.1 per cent at 106.30, having recovered from a dip below the 106 threshold after Wall Street shares resumed their advance.

The yen has been on the defensive amid hopes that the Bank of Japan would further ease monetary policy at its July 28-29 policy meeting.

While the BOJ has effectively dashed hopes that it would adopt unorthodox "helicopter money" stimulus methods, the market has still maintained its expectations that the central bank would ease in one form or the other. "At this point it is hard to tell how much the yen would weaken even if the BOJ were to ease. It is widely expected to ease through its ETF-purchasing program and that won't have much of a yen-weakening effect," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities in Tokyo.

The ongoing boon for risk assets is a key factor supporting the dollar and weakening the yen, but the headwinds commodity markets are beginning to face could reverse that trend, Yamamoto said.

Central bank meetings will be the focus of market attention this week, with the Fed also holding a policy conclave on July 26-27.

While the Fed is widely expected to stand pat on monetary policy, investors will be sifting through its statements for the merest hint of a near-term rate increase.

The Australian dollar edged up 0.1 per cent to US$0.7474 . Sterling crawled up 0.1 per cent to US$1.3124 after falling roughly 1 per cent on Friday after surveys showed business activity had wilted after the Brexit vote.

REUTERS