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The dollar fell from near 13-year highs against the yen on Monday on a media report that US authorities were uncomfortable with their strong currency.
US President Barack Obama was quoted in a Bloomberg headline citing an unnamed French official as saying that a strong dollar was a problem. Traders said that was seen as an excuse to sell the dollar in early European trade.
Concerns over strong dollar
Some US officials, including from the Federal Reserve, have in the past few months raised concerns about a strong currency impacting growth and exports.
The dollar was down 0.4 per cent at 125.15 yen, having hit a 13-year high of 125.86 yen on Friday after a robust US jobs report.
“The dollar is off this morning because of the headline about a strong dollar from Obama,’’ said Alvin Tan, currency strategist at Societe Generale.
“Nevertheless, the dollar ended firm last week and the US data, especially average earnings, seems to support the case for a rate hike. We are expecting one in September.’’
Fed rate hike
A Reuters’ poll conducted after the payrolls data on Friday showed Wall Street’s top banks expect the Fed to begin raising interest rates in September, followed by another before the end of the year.
New York Fed President William Dudley had said on Friday he still expects the Fed to be in a position to raise interest rates later this year even though he has concerns about progress in the labour market.
Speculators increased bets against the yen, with net short positions rising to their largest level in four months last week.
“The direction is clear: Dollar/yen will maintain its rally. But I think it’s too early to say that the dollar will test 130 yen soon,’’ said chief trader at a Japanese brokerage. “The Fed will need to check a wide range of data, such as US retail sales data due Thursday, to confirm the strength of the recovery."
There was little reaction to data released on Monday that showed Japan’s economy expanded more than initially expected in January-March as companies ramped up investment.
Bund yields, industrial output data
The euro edged up partly on rising Bund yields and better-than-expected German industrial output data which suggested that Europe’s largest economy got off to a good start in the second quarter. The euro changed hands at $1.1156, up 0.4 per cent on the day.
Nevertheless, the euro was likely to find it tough to gain much as it remained hostage to shifts in sentiment over Greece’s debt problems.
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