Dollar Up Against Yen, Euro on Signs of Greek Deal Progress

 
   By Hiroyuki Kachi 
 

        The dollar gained against the yen and the euro in Asia trade Tuesday, as risk-taking sentiment strengthened following signs of progress in Greece's bailout talks and upbeat U.S. economic data.
        Around 0450 GMT, the greenback was at Y123.75 after briefly touching Y123.79, compared with Y123.36 late Monday in New York.
        The overall effect of the renewed optimism caused the euro to lose ground against the dollar, falling to $1.1265 from $1.1341. It also fell against the yen to Y139.46 from Y139.86.
        The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was up 0.41% at 86.20.
        European Commission President Jean-Claude Juncker said Monday he was convinced an agreement between Greece and its international creditors over the country's bailout program would be finalized this week, following the submission of a proposal by Greece earlier Monday offering new concessions.
        The greenback stretched its gains in Asia trade continuing the overnight momentum generated by the Greek news, coupled with upbeat U.S. housing data. Those factors combined to trigger the biggest one-day yield increase in benchmark U.S. 10-year notes in three weeks.
        The improvement in risk-taking sentiment was also demonstrated by a rise in the Nikkei Stock Average. The benchmark Nikkei was up 1.9% in the afternoon session.
        Investors are now shifting their eyes to U.S. economic data such as durable goods orders for May to shape their views on the likely timing of a Federal Reserve decision to raise short-term rates.
        Still, while the dollar "looks more likely to go higher than lower," any gains are likely to be limited in the short term, said Marito Ueda, director at FX Prime byGMO, with upward momentum weakening.
        The dollar at Y125 is now "far away" and "it would be difficult to keep buying from where we are," said Mr. Ueda, adding that comments by Bank of Japan Gov. Haruhiko Kuroda earlier this month were still weighing on the market despite a later clarification by the governor.
        Mr. Kuroda caused the dollar to slide roughly Y2 from around Y124.60 after saying the yen was unlikely to weaken anymore in relative terms. He later clarified his position by saying he was neither trying to assess the nominal exchange rate nor forecast its future movement.
        "The dollar still remains rangebound against the yen," said Toshihiko Sakai, senior manager of forex and financial products trading division at Mitsubishi UFJ Trust and Banking.
        Mr. Sakai said option-related risk reversals were showing a slight inclination toward dollar selling and yen buying, amid a falloff in volatility. That's probably because some investors hedging against the pair's upside risk have scaled down positions ahead of the June 30 book closing, he said.
        This may only generate short-lived downward pressure on the dollar, but "it seems investors feel they need more fresh trading cues if they are to go beyond 125 or 126," especially after Mr. Kuroda's remarks.
        Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com
        (END) Dow Jones Newswires

        June 23, 2015 02:02 ET (06:02 GMT)

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