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Dollar near eight-year high against yen

Wednesday, May 27, 2015 - 13:40
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The dollar was sitting around eight-year highs against the yen Wednesday following upbeat US data, while the euro came under further selling pressure on growing fears Greece will default on its debt obligations.

[TOKYO] The dollar was sitting around eight-year highs against the yen Wednesday following upbeat US data, while the euro came under further selling pressure on growing fears Greece will default on its debt obligations.

In Tokyo, the greenback bought 123.15 yen, compared with 123.09 yen in New York, where it passed the 123.30 yen level at one point, its highest since mid-2007.

Figures on Tuesday pointing to improvements in US consumer confidence, home sales and prices, and orders for core industrial goods pointed to a pick-up in growth in the world's biggest economy after a weak first-quarter.

The latest results, along with comments on Friday from Federal Reserve chief Janet Yellen that she expects to hike interest rates "at some point this year", put talk of a rate increase back on the table.

"Looking at Yellen's comments from the end of last week, it seems like she's determined to act this year," said Yasuhiro Kaizaki, vice-president for global markets at Sumitomo Mitsui Trust Bank.

"Until recently, I think people were only really buying the dollar against the euro, but it's clear now that you can buy the dollar against many different currencies."

The dollar has gained 8.4 per cent in the past six months against a basket of developed-nation currencies tracked by Bloomberg as expectations for a rate rise build. That is despite struggling in recent weeks on the back of a string of weak data that had analysts suggesting a rise could be put back to the start of 2016.

"The Fed is approaching the hiking stage within this year," Kei Katayama, who trades US bonds in Tokyo at Daiwa SB Investments, told Bloomberg News. "With Greece, geopolitical risk is increasing. The dollar is a safe haven."

The euro bought US$1.0881 and 133.91 yen, against US$1.0879 and 133.92 yen in US trade.

The long-running saga over Greece's bailout reform continues to drag on the single currency, with Athens unable to reach an agreement with its creditors that will release much needed cash to help it avoid a default.

With a June 5 repayment deadline looming, the two sides have still not reached a deal that will unlock the last batch of bailout money. There are fears that a Greek default could see the country tumbling out of the eurozone, spooking global investors.

The common currency is sharply down from US$1.1149 and 134.54 yen last week.

AFP

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