US dollar holds steady on improved risk appetite

[TOKYO] The dollar held its ground Tuesday against major currencies as investors returned to equities, betting that the Federal Reserve would delay hiking rates after seeing disappointing US economic data.

The dollar bought 120.45 yen in Tokyo, little changed from 120.46 yen.

The euro stood at US$1.1194 and 134.84 yen, compared with US$1.1187 and 134.77 yen.

Poor US jobs data released on Friday has convinced many Fed watchers that the US central bank will delay a plan to lift interest rates until December at the earliest.

The view has improved investors' appetite for risk, boosting international equities and the greenback, while keeping the yen under pressure.

At times of robust risk appetite, investors generally drop the yen, seen as a low-yielding "safe haven" unit to be favoured during times of financial uncertainty.

"The way the market is looking at the (US) payrolls numbers is weak enough to diminish the case for higher US rates, but not weak enough to point to a materially weaker economy," Adam Cole, London-based head of global foreign-exchange strategy at Royal Bank of Canada, told Bloomberg News.

"They're positive for risk appetite." Also adding support for the dollar was the prospect that the Bank of Japan, which starts a two-day meeting Tuesday, could offer further easing measures later this year, a move likely to drive down the yen and lift the US unit.

"As Fed rate-hike expectations are pushed back, stocks and commodities saw a big rebound and eased risk aversion," Etsuko Yamashita, chief economist at Sumitomo Mitsui Banking Corp, told Bloomberg News.

"That's laying the groundwork to make it easier for the yen to weaken," she added.

AFP