Dollar regains poise but housing jitters linger
Friday, 7 September 2007
TOKYO, Sept 6 (AFP): The dollar steadied in Asian trade today, recovering some of the previous day's losses against the yen on hopes that global share prices will rebound despite the US housing woes, dealers said.
They said that a late recovery in Japanese share prices, and expectations that Wall Street could follow suit, encouraged players to engage in risky carry trade bets that favour high- yielding currencies.
The dollar rose to 115.39 yen in Tokyo afternoon trade, up from 115.26 in New York late Wednesday when it had fallen from above 116 yen.
The euro edged up to 1.3648 dollars from 1.3642 while gaining to 157.49 yen from 157.27.
The dollar had come under selling pressure Wednesday after the US National Association of Realtors reported a sharp drop in pending sales of existing homes in July.
The dollar was also dragged down by a fall in US share prices after the Federal Reserve's "Beige Book" survey dimmed investor hopes that the central bank would cut interest rates later this month.
While the report suggested the housing market was still encountering problems, it also said the overall US economy was feeling a "limited" impact from the housing market downturn and related credit pinch.
The report "pointed to the potential for the Fed to hold off on cutting rates on September 18, with it referring to the economic downturn as well as tighter credit conditions so far being limited to the housing sector," noted forex analysts at Barclays Capital.
The yen's strength, however, was capped by renewed appetite for carry trades that enable investors to borrow cheap funds in Japan to invest in high-yielding currencies, and by demand for dollars from Japanese importers, traders said.
They said that a late recovery in Japanese share prices, and expectations that Wall Street could follow suit, encouraged players to engage in risky carry trade bets that favour high- yielding currencies.
The dollar rose to 115.39 yen in Tokyo afternoon trade, up from 115.26 in New York late Wednesday when it had fallen from above 116 yen.
The euro edged up to 1.3648 dollars from 1.3642 while gaining to 157.49 yen from 157.27.
The dollar had come under selling pressure Wednesday after the US National Association of Realtors reported a sharp drop in pending sales of existing homes in July.
The dollar was also dragged down by a fall in US share prices after the Federal Reserve's "Beige Book" survey dimmed investor hopes that the central bank would cut interest rates later this month.
While the report suggested the housing market was still encountering problems, it also said the overall US economy was feeling a "limited" impact from the housing market downturn and related credit pinch.
The report "pointed to the potential for the Fed to hold off on cutting rates on September 18, with it referring to the economic downturn as well as tighter credit conditions so far being limited to the housing sector," noted forex analysts at Barclays Capital.
The yen's strength, however, was capped by renewed appetite for carry trades that enable investors to borrow cheap funds in Japan to invest in high-yielding currencies, and by demand for dollars from Japanese importers, traders said.