Dollar Dragged Down Against Yen by Nikkei Fall, RBA Rate Cut

 
   By Hiroyuki Kachi 
 

        The dollar was lower against the yen in Asian trade Tuesday, with investors seeking to take profits on overnight gains in the greenback as Tokyo stocks failed to pick up on the positive mood in overseas stock markets.
        The downward movement gained momentum when the Reserve Bank of Australia surprised markets by cutting rates, triggering sharp declines in the Australian currency against the yen, a fall in the Nikkei Stock Average and a further drop in the U.S. dollar to as low as Y116.87.
        Around 0450 GMT, the dollar was at Y116.91 compared with Y117.48 late Monday in New York.
        The benchmark Nikkei index was down in the morning session despite gains on Wall Street overnight, prompting buying of the safe-haven Japanese currency and selling of the dollar to take profits.
        "Because the Australian dollar fell considerably (against the yen), the Nikkei index stretched its losses even further," putting more downward pressure on the dollar against the yen, said Yuzo Sakai, manager at FX business promotion at Tokyo Forex & Ueda Harlow.
        The Australian dollar hit as low as Y89.68, its lowest since February 2014 before changing hands at Y89.55 at 0450 GMT, compared with Y91.70 late Monday. The Nikkei was down 1.4% in afternoon trading.
        The RBA lowered its benchmark interest rate to a record low of 2.25%, joining a procession of central banks that have eased policy settings since the start of the year in response to the deflationary impact of tumbling oil prices.
        The RBA's decision may cloud expectations that the Federal Reserve will go ahead with interest rates increase as early as later this year.
        "With the global economy slowing down and showing signs of reaching a turning point, the Fed may have to change its stance slightly," said Mr. Sakai, adding that accelerated one-sided strength in the U.S. currency as a result of an eventual rate increase would be problematic.
        Among other currency pairs, the euro was at $1.1329 from $1.1335 and was at Y132.47 from Y133.16.
        The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was up 0.15% at 85.80.
        Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com
        (END) Dow Jones Newswires

        February 03, 2015 00:46 ET (05:46 GMT)

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