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US dollar hits 2-week high vs yen on US-Japan summit relief

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The US dollar rose to a two-week high versus the yen on Monday, with the market breathing a sigh of relief as the closely watched two-day US -Japan summit held over the weekend was seen to have ended smoothly.

[TOKYO] The US dollar rose to a two-week high versus the yen on Monday, with the market breathing a sigh of relief as the closely watched two-day US -Japan summit held over the weekend was seen to have ended smoothly.

US President Donald Trump and Japanese Prime Minister Shinzo Abe appeared to have established a quick friendship through a hug, a prolonged handshake and rounds of golf, allaying investor fears of the meeting ending acrimoniously with Mr Trump talking tough on trade, currency and security issues.

The US dollar index against a basket of major currencies was up 0.15 per cent at 100.930, close to a near two-week high of 101.010 reached on Friday when pledges of "phenomenal" tax reforms by Mr Trump had boosted the greenback.

The US dollar was up 0.65 per cent at 113.920 yen, briefly touching 114.170, the highest since Jan 30.

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"There is relief that the summit ended without confrontation, and that the joint statement did not directly touch upon currency issues," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.

There was concern prior to the summit that Mr Trump would reiterate accusations that Japan was one of several countries devaluing their currencies to the disadvantage of the United States.

"While the outcome of the US-Japan summit itself is not a huge dollar boosting factor, the currency continues to receive firm support from expectations towards Trump's 'phenomenal' tax plans," Mr Yamamoto said.

Mr Trump said his administration would be announcing "something phenomenal in terms of tax" over "the next two or three weeks" during a meeting with airline executives on Thursday.

The president's comments increased risk appetite, sending Wall Street shares to record highs on Friday, in turn lifting US Treasury yields from multi-week lows to the US dollar's advantage.

The market's near-term focus was on Federal Reserve Chair Janet Yellen's congressional testimony scheduled for Tuesday and Wednesday. Investors are keen to gauge Ms Yellen's policy stance after the central bank upgraded its inflation views earlier this month.

"Trump has just taken a positive approach to tax reforms and infrastructure spending. It remains to be seen if this has any impact on Yellen, as the Trump administration's lack of policy clarity seemed like a factor that made the Fed hesitant to raise rates," said Koji Fukaya, president at FPG Securities.

US indicators being awaited for their potential market impact included the January producer price index (PPI) on Tuesday, the January consumer price index (CPI) and retail sales on Wednesday and housing-related data on Thursday.

The euro was down 0.2 per cent at US$1.0621, dipping close to Friday's 3-1/2-week low of US$1.0608.

The common currency fell 1.3 per cent last week, its biggest weekly loss in three months, as political risks rose on the back of election concerns in countries such as France and Germany. Resurfacing Greek debt woes further hurt confidence towards the euro zone.

Elsewhere, the New Zealand dollar inched up 0.1 per cent to US$0.7203. It continued to edge away from a 2-1/2-week low of US$0.7172 struck Thursday after the Reserve Bank of New Zealand (RBNZ) signalled that it would keep interest rates at record lows for two years.

"The RBNZ has clearly knocked the New Zealand dollar lower. However, we still find it difficult to get overly bearish given a still solid economic picture," wrote Philip Borkin, senior economist at ANZ.

The Australian dollar was little changed at US$0.7671 after surging 0.7 per cent on Friday on upbeat Chinese trade data and an optimistic economic view given by the Reserve Bank of Australia. A rise above US$0.7696 would take the Aussie to a three-month high.

REUTERS

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