USDJPY Heads For Its Biggest Weekly Drop

by on July 11, 2014 12:41 pm GMT

USDJPY heads for its worst week since April as Treasuries rose on bets the central bank will keep interest rates lower for longer.

A gauge of the dollar was poised for its fourth loss in five weeks after minutes of the Fed’s June meeting failed to provide additional insight on the pace of rate increases, and record-low volatility encouraged demand for higher-yielding assets. South Korea’s won slid for a sixth day amid speculation the central bank will cut interest rates. South Africa’s rand weakened as a metalworkers strike continued after the union rejected a pay offer.

“As we saw this week and will probably see over coming weeks are these periods of disappointment, where you get the Fed minutes and they’re not as hawkish as the market wants them to be,” said Stuart Bennett, head of Group-of-10 foreign-exchange strategy at Banco Santander SA in London. “The bias in the market is that the dollar will be stronger because the U.S. is going to tighten rates, but they are probably getting a little premature in terms of timing and therefore prone to disappointment.”

The dollar was little changed at 101.31 yen at 7:14 a.m. in New York, having declined 0.7 percent this week, the most since the period ended April 11. The U.S. currency was also little changed at $1.3605 per euro. The yen traded at 137.83 per euro after appreciating to 137.50 yesterday, the strongest level since Feb. 6.

Treasury 10-year yields declined 11 basis points this week, the most since the five days ended March 14.
Yellen Testimony

Fed Chair Janet Yellen is scheduled to testify before the Senate Banking Committee in Washington on July 15 and the House Committee on Financial Services the following day.

Minutes of the Federal Open Market Committee’s June 17-18 meeting released two days ago offered no new clues on the timing of an interest-rate increase, with officials saying policy depends most “on the evolution of the economic outlook.”

“The dollar is being sold partly due to some disappointment about the FOMC minutes,” said Koji Iwata, senior vice president for foreign-exchange trading at Mizuho Bank Ltd., in New York. “There is some sense that one cannot count much on next week’s testimony.”