TOKYO, Feb. 19 (Kyodo) — The U.S. dollar overcame early selling and attempted to retake the 107 yen line Thursday in Tokyo as hedge funds running short-term funds continued to buy back the currency.
At 5 p.m., the dollar was quoted at 106.72-74 yen, compared with Wednesday’s 5 p.m. quotes of 106.70-80 yen in New York and 105.57-60 yen in Tokyo. It moved between 106.30 yen and 106.88 yen during Thursday trading in Tokyo, trading most actively at 106.60 yen.
Meanwhile, the euro moved little against its major counterparts for most of the day’s Tokyo session after undergoing wild fluctuations overnight in London and New York.
The single European currency stood at $1.2711-2713 and 135.66-70 yen at 5 p.m. against $1.2685-2695 and 135.35-45 yen at 5 p.m. Wednesday in New York.
In the morning, the dollar trimmed sharp overnight gains above 107 yen and mostly traded around the mid-106 yen level as it faced selling by Japanese exporters.
”The dollar briefly dropped to 106.30 yen from an early high of 106.77 yen, which was a (high) level not seen for a long time for exporters” in Japan, said Tatsuro Karitani, a foreign exchange manager at Mizuho Corporate Bank.
But the early selling gave way to dollar buybacks possibly by hedge funds based in the United States and Middle East in the late morning, dealers said.
Koji Fukaya, a chief market analyst at the Bank of Tokyo-Mitsubishi, said the hedge funds began buying back the overly sold dollar earlier this week prior to the release Wednesday of Japan’s October-December gross domestic product (GDP) data.
”After seeing that the dollar did not fall following the release of (stronger-than-expected Japanese) GDP, they apparently stepped up the buybacks,” he said.
The early selling followed the dollar’s rise to a one-month high of 107.15 yen overnight in New York.
Dealers said the dollar’s sudden spike against the yen was a chain reaction to the euro’s wild fluctuations against the dollar.
First, the single European currency rose to $1.2930 in London on Wednesday, its highest level since the currency’s introduction in 1999.
But its rise above the $1.29 line created ”a sense of accomplishment” among currency market players who have bid up the euro over the past several months, dealers said. The single currency subsequently came under fierce selling pressure, plunging to $1.26 levels in late New York trading Wednesday.
Meanwhile, the dollar, which started the New York session around 105.70 yen, jumped by a yen and a half to touch 107.15 yen later in the session on buying associated with the dollar’s sharp rebound against the euro.
But dealers said maybe not all of the dollar’s buying against the yen stemmed from the shrinking euro gains. Japanese monetary authorities might have secretly jumped on the bandwagon to depreciate the yen, they said.
