By Hiroyuki Kachi
The dollar strengthened against the yen in Asian trade Friday,
with lower oil prices among the factors accelerating the selling of
the Japanese currency.
As of 0450 GMT, the dollar was at Y118.29 from Y117.74 late
Thursday in New York, amid thin trading due to the U.S.
Thanksgiving holiday.
Following a decision by the Organization of the Petroleum
Exporting Countries to keep intact its established production
targets despite the recent sharp falls in crude prices, Nymex West
Texas Intermediate crude tumbled below $70 a barrel for the first
time in four years.
The OPEC decision gave an upward bias to the greenback that
spread to trading in Asia.
"Oil price weakness is a direct boon to the U.S. economy," said
Shinji Kureda, head of FX trading group at Sumitomo Mitsui Banking
Corp.
The resulting improved sentiment about the U.S. recovery was
reflected in Tokyo share prices, which gained traction from the
opening bell. The Nikkei Stock Average was up 1.2% midway through
the afternoon session.
Traders also cited buying by Japanese importers related to
commercial transaction settlements ahead of the regular book
closing at the end of the month.
"There are investors who have no choice but to buy (the dollar),
even though they don't really want to," at this level, said Yuzo
Sakai, manager of FX business promotion at Tokyo Forex & Ueda
Harlow.
Some traders and analysts also noted the latest fall in Japan's
inflation rate.
Japan's annual rate of inflation moved further away from the 2%
level targeted by Prime Minister Shinzo Abe and the Bank of Japan
in October. Growth in the core consumer price index fell last month
to 0.9%, providing more bad news for the central bank. The
inflation figure strips out volatile fresh food prices and is
adjusted for a sales tax increase in April.
"That maintains expectations for additional monetary easing by
the Bank of Japan, though nothing immediate is expected," said Yuji
Saito, executive director of foreign exchange department of Credit
Agricole.
A fall in Japan's two-year government bond yield into negative
territory for the first time ever, provided another catalyst for
the dollar's strength against the yen. Expectations for a widening
gap between U.S. and Japanese interest rates has been one of the
drivers of the yen's decline against the greenback.
"I think the negative yield on the two-year note can be cited as
one reason behind the yen weakness," said Akito Fukunaga director
of bond research at Barclays in Tokyo.
With the dollar gaining momentum again, verbal intervention by
Japan's currency authorities is likely if the greenback comes
closer to the Y120 threshold, said Credit Agricole's Mr. Saito, who
expects the dollar will likely move in a Y117.00-Y119.50 range
during next week.
In other currency trading, the euro was at $1.2447 from $1.2466,
while the euro was at Y147.26 from Y146.74.
The WSJ Dollar Index, a measure of the dollar against a basket
of major currencies, was up 0.29% at 80.72.
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 118.29-30 117.69-75 +0.49 118.33 117.72 +12.33
EUR/USD Euro 1.2447-50 1.2465-69 -0.15 1.2467 1.2446 -9.43
GBP/USD U.K. 1.5707-10 1.5733-41 -0.18 1.5740 1.5706 -5.13
USD/CHF Switzerland 0.9654-58 0.9638-44 +0.15 0.9658 0.9642 +8.13
USD/CAD Canada 1.1348-54 1.1329-38 +0.15 1.1353 1.1330 +6.86
AUD/USD Australia 0.8492-94 0.8543-47 -0.61 0.8547 0.8490 -4.73
NZD/USD New Zealand 0.7830-32 0.7864-69 -0.45 0.7874 0.7828 -4.75
Euro Rate
EUR/JPY Japan 147.24-26 146.72-81 +0.33 147.31 146.76 +1.74
Source: ICAP PLC
Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com