You are here
US dollar slips vs yen on concerns over suspected Japan cronyism scandal
[SINGAPORE] The dollar eased versus the yen on Monday, as traders worried that a suspected cronyism scandal in Japan involving the sale of state-owned land could dampen investors' risk appetites.
The name of Japanese Prime Minister Shinzo Abe's wife was removed from documents regarding the suspected cronyism scandal, media said on Monday, as pressure mounted on the premier and his ally Finance Minister Taro Aso over a possible cover-up.
Mr Abe has repeatedly denied he or his wife did favours for school operator Moritomo Gakuen, which bought the land in question, and has said he would resign if evidence were found that they had.
The prime minister had hoped to put the issue of the sale of state-owned land at a huge discount to the school operator with ties to his wife behind him, but it has gathered steam with a series of fresh revelations.
Market participants said the political developments in Japan helped temper gains in Japanese equities and lent some support to the yen, which tends to rise in times of economic uncertainty.
Japan's Nikkei share average was last up 1.4 per cent, after rising 2.3 per cent earlier on Monday.
"The yen could strengthen if this leads to uncertainty over economic policies," said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
Such concerns appeared to be limiting gains in Tokyo shares, although it seemed a bit premature to factor in such risks, Mr Okagawa added.
The dollar eased 0.2 per cent to 106.62 yen, edging away from a one-week high of 107.05 yen set on Friday following news of higher-than-expected US jobs growth in February.
The strong US job growth data was counterbalanced by slower increases in wages, resulting in money market traders sticking to bets that the Fed would raise interest rates three times this year, with only around a one-in-four chance seen for a fourth rate hike in 2018.
The dollar had risen against the yen last week as risk appetite improved on hopes for a breakthrough in the standoff over North Korea's nuclear weapons programme.
The greenback also gained ground against the yen last week as fears of a global trade war receded.
US President Donald Trump imposed import tariffs on steel and aluminium, while softening his stance by announcing exemptions for Canada and Mexico, and leaving open the chance for other countries to obtain their own.
While downside pressure on the dollar against the yen has shown signs of abating recently, any dollar gains would probably be limited for now, said Shinichiro Kadota, senior FX strategist for Barclays in Tokyo.
"Over the past several weeks the dollar has been trading in a range of around 105 yen to 108 yen. In the near term, it seems unlikely that there will be a break out of this range," he said.
Reasons to buy the dollar appear limited for now, given factors such as lingering uncertainty over US trade policy, Mr Kadota added.
The euro edged up 0.1 per cent to US$1.2322, but was still some ways below a near three-week high of US$1.2447 set on Wednesday.
The common currency has retreated after European Central Bank President Mario Draghi said on Thursday that regional inflation remained subdued and rising protectionism was a risk.