Dollar dips vs. yen after Abe-party election win The U.S. dollar pulled lower against the yen on Monday following an election victory seen as empowering Japan’s prime minister to move forward with economic reforms in the world’s third-largest economy. The dollar USDJPY -0.58% traded at ¥100.15, down from ¥100.60 on Friday but off an intraday low of ¥99.50, according to FactSet data. Exit polls showed Japanese Prime Minister Shinzo Abe’s ruling Liberal Democratic Party on Sunday won a majority in the upper house election, as expected. The result puts the LDP in control of both chambers of parliament and allows Abe to tackle structural reforms to revive lackluster economic activity and battle deflation under his plan, popularly known as “Abenomics.” “The next six months are now crucial to see whether the much-needed reforms are implemented,” Kim Eng Securities director of sales trading Andrew Sullivan told clients Monday. Reform issues that Abe may address include adjustments to a planned sales-tax increase, a reduction in Japan’s corporate tax-rate and easing of some regulations related to the labor market. Abe was seen as the driving force behind the Bank of Japan’s aggressive monetary-stimulus plan, launched in April. The yen has lost about 8% of its value against the dollar since the plan was announced, and at one point, the dollar pushed to highs against the yen not seen in more than four years. The Bank of Japan’s “aggressive monetary easing — no matter whether Abenomics ultimately succeeds or fails — should, in the coming quarters, provide a welcome cushion,” as likely stimulus tapering by the U.S. Federal Reserve will deliver a “stiff headwind” to leveraged economies in emerging economies in Asia, wrote HSBC co-head of Asian economic research Frederic Neumann in a report. “The large [Association of Southeast Asian Nations] markets look set to benefit the most. It’s now up to Abe to make sure the local Japanese economy receives a lasting boosting as well,” said Neumann, referring to the 10-nation bloc which includes Thailand, Indonesia, Malaysia and others. The ICE dollar index DXY -0.22% , which measures the greenback against six other major currencies including the yen, fell to 82.474 from 82.633 late Friday in North America. The WSJ Dollar index XX:BUXX -0.31% , which uses a slightly larger comparison basket, fell to 74.64 from 74.84. The indexes felt the weight of euro strength against the dollar, with the euro EURUSD +0.14% trading at $1.3155, up from $1.3139, after Portugal’s president late Sunday backed the current coalition government of Prime Minister Pedro Passos Coelho. The support from President Anibal Cavaco Silva removed the threat of snap elections and associated hurdles to implementing unpopular austerity measures, reports said. The British pound GBPUSD +0.11% also gained against the greenback, trading at $1.5286, versus $1.5268. The Australian dollar AUDUSD +0.41% fetched 92.15 U.S. cents, stepping back from 91.76 U.S. cents late Friday. The Aussie on Friday traded above 92 cents after the People’s Bank of China said it would end some controls on lending interest rates. China is Australia’s biggest trading partner.
Posted on: Mon, 22 Jul 2013 03:38:09 +0000
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