By Hiroyuki Kachi
The dollar was largely unchanged against the yen and the euro in
quiet trading in Asia on Friday, with the reduced number of market
participants amid the holiday season avoiding any major moves.
As of 0515 GMT, the dollar was at Y120.20 from Y120.15 late
Thursday in North America. The euro was at $1.2216 from
$1.2222.
After flows related to commercial transaction settlements ran
their course in the middle of the morning, the dollar became
largely static, with its downside well supported above Y120, as
fears about risk factors such as tumbling oil prices receded.
Investors played down a slew of Japanese economic indicators
released earlier in the day such as inflation, industrial output
and labor data. While the data showed inflation slowing in Japan,
despite efforts to get it to increase, the market reaction to the
November figures was largely muted.
"Although it may be premature to say Y120 is completely
supported, I feel that Y115 and Y117 are a considerable distance
from where we are now," said Marito Ueda, director of FX Prime
byGMO.
After the return of participants in the U.S. and Europe from the
Christmas vacation, Mr. Ueda said the focus will be on whether the
dollar will test its upside beyond a recent high of Y121.86 set on
Dec. 8 and approach the Y122 line during the coming week.
"It's the market of a stronger dollar rather than a weaker yen,"
and investors will likely shift their focus more to the growing gap
in interest rates between U.S. and Japan, said Mr. Ueda.
With U.S.-Japan bond yield differentials widening rapidly since
earlier this month, the dollar may "rise (against the yen) as it
catches up with the gap after market liquidity normalizes,"
following the holiday season this week, said J.P. Morgan chief FX
strategist Junya Tanase.
Noting that the yield gap between two-year Japanese government
bonds and the corresponding U.S. Treasurys is now at the widest
level since May 2010, Mr. Tanase estimates that a dollar-yen rate
consistent with the gap should be in a range up to the lower half
of the Y126-level from the lower half of the Y121-level.
Earlier Friday, government data showed the rate of increase in
Japan's core consumer price index--adjusted for volatile fresh-food
prices and the impact of a national sales tax increase in
April--fell to 0.7% in November from a 0.9% rise the previous
month.
Industrial production fell 0.6% from the previous month,
adjusted for seasonal variations, according to separate data,
confounding economists' forecast for a 0.8% increase.
These figures indicate that the economy is still struggling to
emerge from a recession. The yield on the benchmark 10-year
Japanese government bonds fell to a record low of 0.300% following
the release of the data. But stock investors largely shrugged off
the figures. The Nikkei Stock Average was up a moderate 0.1% in
afternoon trading.
In other currency trading, the euro was at Y146.82 from
Y146.83.
The WSJ Dollar Index, a measure of the dollar against a basket
of major currencies, was up 0.07% at 82.52.
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 120.21-22 120.10-11 +0.09 120.44 120.10 +14.15
EUR/USD Euro 1.2217-20 1.2224-27 -0.06 1.2229 1.2204 -11.07
GBP/USD U.K. 1.5557-62 1.5557-62 0.00 1.5571 1.5552 -6.04
USD/CHF Switzerland 0.9840-44 0.9836-40 +0.04 0.9854 0.9836 +10.21
USD/CAD Canada 1.1613-18 1.1624-29 -0.09 1.1630 1.1612 +9.37
AUD/USD Australia 0.8119-23 0.8117-21 +0.02 0.8129 0.8097 -8.94
NZD/USD New Zealand 0.7739-45 0.7735-41 +0.05 0.7744 0.7714 -5.83
Euro Rate
EUR/JPY Japan 146.85-89 146.80-84 +0.03 147.08 146.77 +1.44
Source: ICAP PLC
Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com