Dollar rally stumbles in Asian trade

TOKYO – The dollar’s rally against the yen stumbled in Asian trade on Tuesday morning as investors looked for concrete signs that the US Federal Reserve would roll back its huge bond-buying program.

The dollar broke through the 102-yen level in Asian trading Monday on the back of speculation that the Fed could be the first among major central banks to roll back a policy known as quantitative easing, as fresh data point to a brighter outlook for the world’s biggest economy.

A weekend article in the Wall Street Journal said the Fed had come up with a strategy to wind down its $85-billion per month bond-buying programme, which has placed downward pressure on the dollar.

The story “continues to reverberate, despite the absence in the piece of any hints as to when the Fed might actually begin the process or precisely what form it night take”, said National Australia Bank (NAB).

In morning Tokyo trade, the dollar bought 101.50 yen, weakening from 101.82 yen in New York on Monday but still stronger than the 99-yen range a week earlier.

At a weekend G7 meeting, finance officials vowed not to weaken their currencies, but did not directly criticise Japan for the yen’s rapid fall due to the Bank of Japan’s aggressive easing policy.

Traders cheered the outcome of the talks, which began a day after the dollar cracked the 100-yen level for the first time in four years.

Japanese media have interpreted the G7’s relative silence on the yen as tacit approval of Tokyo’s policy — likely to stoke further yen weakness — which had previously stirred criticism, particularly from Europe, that it could set off a global currency war.

“There appears to be common agreement that Japan is not deliberately weakening the yen,” Credit Agricole said, adding that “we expect the yen to remain under pressure”.

In other forex trading on Tuesday, the euro fetched $1.3015 and 132.12 yen against $1.2975 and 132.11 yen in US trade, as markets look to a key German business survey for clues about the state of Europe’s biggest economy.

“Offshore tonight, the main interest will be in the latest German ZEW survey after recent upside surprises in German factory foods orders and industrial production that offer hope the German economy could be back on the up,” NAB said.