Dollar Flast Against Yen, Euro After U.S. Retail Sales

 
   By Hiroyuki Kachi 
 

        The dollar was almost flat against the yen and the euro in directionless Asia trade Thursday, with disappointing U.S. retail sales data overnight keeping a lid on any strong gains in the greenback.
        Around 0450 GMT, the dollar was at Y119.14, compared with Y119.15 late Wednesday in New York. The euro was at $1.1370 from $1.1356 after briefly hitting $1.1383 overnight. Meanwhile, the common currency was at Y135.45 from Y135.27.
        Having touched its two-week low of Y119.03 overnight following the weak retail sales data for April, the latest in the series of economic data weak enough to push back market expectations for the Federal Reserve to raise rates, the greenback was biased downward against the yen.
        But the U.S. currency's downside was well supported from dip buying from Japanese corporate investors.
        "We will continue to see patterns of selling by short-term players followed by buying (on dips) by long-term players," making the dollar's downside against the yen well supported, said Mizuho Securities chief FX strategist Kengo Suzuki.
        But Mr. Suzuki said investors may find it "hard to make moves despite their desire to break through," resulting in low volatility keeping the dollar in a tight range against the yen over the next few weeks.
        Mr. Suzuki said although investors believe the Federal Reserve is leaning toward raising short term rates, a raft of weak U.S. economic data will keep them on the sidelines. Meanwhile, there still remain hopes for the Bank of Japan to ease its monetary grip, but it's hard to expect such a move in the near future until scrutinizing Japan's inflation data.
        In fact, benchmark one-month implied volatility hit its lowest since September last year, when the dollar finally started gaining traction after being straightjacketed in a tight range between Y101 and Y104 for more than 7 months.
        "The possibility is increasing that we are returning to the rangebound market," although the level is higher than what investors saw last year, said IG Securities market analyst Junichi Ishikawa.
        If the implied volatility falls further with a mixture of good and bad U.S. economic data, we may continue to see rangebound trade between Y118.50 and Y120.50, said Mr. Ishikawa, noting that what may give big momentum to the market would be speculation about the June Federal Open Market Committee.
        The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was down 0.09% at 84.23.
        Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com
        (END) Dow Jones Newswires

        May 14, 2015 01:21 ET (05:21 GMT)

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