U.S. Dollar Under Pressure Against Yen At Forex Market

U.S. dollar remained under downward pressure against the yen in Asia Friday, as traders watched for any signs that Japanese financial authorities might attempt to weaken the yen through Forex market intervention. The biggest focus remains intervention; without such action, the pair won’t bounce back. Renewed optimism over Europe after Thursday’s plan to stem the region’s sovereign debt crisis and a global stock market rally have helped improved market appetite for taking on risk. But that has not helped weaken the yen, typically considered a safe-haven asset in times of market turmoil, against the dollar, as the trade is an independent of such risk-on/risk-off sentiment, possible intervention is instead the dominant factor. At 0450 GMT, the dollar was at Y75.87, after hitting a fresh record low of Y75.66 overnight, according to EBS via CQG. As the Asian trading day wore on, however, the chances of action by the Japanese government appeared to be fading, at least for now. Even if the dollar hit a fresh record low overnight for the third consecutive day, recent tight movements and the stock market rally have apparently made (the finance ministry) hesitant to decide on intervention. Recent movements are excessive or disorderly, which are conditions needed to justify currency intervention under an agreement by the Group of Seven industrialized countries. Finance minister Jun Azumi kept up his warnings over the strong yen Friday, though he left it unclear how close Tokyo is to intervening in the markets. There is a concern about speculative movements in the foreign exchange markets. Upcoming events such as the G-20 summit in Cannes on Nov. 3-4 may make Japan reluctant to act. Meanwhile, the market is also focusing on U.S. Federal Reserve’s policy-setting meeting next week as an event that could trigger a selloff of the dollar amid growing speculation about further credit easing in the U.S. There isn’t expectation that Fed to take additional steps soon after U.S. economic growth accelerated in the third quarter to 2.5%, the strongest performance in a year, there’s no reason for the dollar to gain.

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