Yen Strengthens Against Dollar Despite Fed's Plan to Cut Balance Sheet

04/06/2017 | 01:48am


By Suryatapa Bhattacharya



TOKYO--The yen continued to strengthen against the U.S. dollar Thursday despite hawkishness from the Federal Reserve's latest policy meeting minutes that included plans for a potential reduction in the Fed's balance sheet this year.



The dollar was at Y110.46, compared with 110.70 late Wednesday in New York. The WSJ Dollar Index, which measures the U.S. currency against 16 counterparts, slipped 0.4% to 90.44.



At their March policy meeting, Fed officials agreed they would likely begin shrinking a $4.5 trillion portfolio of Treasury and mortgage securities by year-end, according to minutes released Wednesday.



Despite the latest Fed plan's hawkishness, which traditionally fuels a stronger dollar in particular against the haven yen, the Japanese currency refused to budge. "These days this correlation is a bit broken," said Kyoya Okazawa, head of global markets for BNP Paribas in Japan.



After recent repatriations by Japanese companies at fiscal year-end, demand for dollars might be reduced. Japanese banks that lost money on overseas investments, especially U.S. fixed income, "cut losses and repatriated yen into Japan," said Mr. Okazawa.



The start of the second quarter is typically marked by outflow into more foreign investments. However, the period has begun with companies--and asset managers--"in safety-driving mode. They are looking for reasons to buy but are struggling to find a catalyst," he said.



A risk-off mood that has permeated the market this week might continue ahead of President Donald Trump's meeting with Chinese President Xi Jinping, especially in light of North Korea's missile launch Wednesday. Investors expect the leaders to focus on geopolitical risk rather than trade.



A political vacuum in South Korea has contributed to investors' worries, Mr. Okazawa said.



In addition, the U.S.'s statement that all options were on the table regarding North Korea were helping fuel the yen's continued gains in Asia trade, said Sean Callow, a senior currency strategist at Westpac Banking Corp.



The yen was up 0.6% against the Australian dollar and 0.2% against the pound.




Interbank Foreign Exchange Rates At 00:50 EST / 0450 GMT

Latest Previous %Chg Daily Daily %Chg
2150 GMT High Low 12/31
Dollar Rates
USD/JPY Japan 110.49-50 110.70-71 -0.18 110.74 110.29 -5.56
EUR/USD Euro 1.0672-75 1.0663-66 +0.08 1.0686 1.0662 +1.46
GBP/USD U.K. 1.2480-82 1.2482-84 -0.02 1.2502 1.2475 +1.10
USD/CHF Switzerland 1.0033-37 1.0047-51 -0.14 1.0052 1.0027 -1.51
USD/CAD Canada 1.3439-44 1.3433-38 +0.04 1.3446 1.3430 0.00
AUD/USD Australia 0.7538-42 0.7568-72 -0.40 0.7577 0.7533 +4.69
NZD/USD New Zealand 0.6968-74 0.6962-68 +0.09 0.6987 0.6960 +0.66

Euro Rates

EUR/JPY Japan 117.93-97 118.03-07 -0.08 118.10 117.78 -4.18
Yen Rates

AUD/JPY Australia 83.30-34 83.78-82 -0.57 83.85 83.15 -1.07
GBP/JPY U.K. 137.88-94 138.16-22 -0.20 138.22 137.73 -4.57
CAD/JPY Canada 82.19-23 82.38-42 -0.23 82.43 82.09 -5.56
NZD/JPY New Zealand 77.01-05 77.07-11 -0.08 77.16 76.86 -4.94

Source: Tullett Prebon



--Kenan Machado contributed to this article.



Write to Suryatapa Bhattacharya at suryatapa.bhattacharya@wsj.com





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