By Suryatapa Bhattacharya and Rachel Koning Beals
Yen attracts short-term buying in wake of earthquake
The dollar advanced moderately against leading rivals Tuesday, supported by continued post U.S.-election optimism that lifted U.S. shares to record highs (http://www.marketwatch.com/story/wall-street-stocks-set-to-struggle-for-direction-in-a-holiday-shortened-week-2016-11-21).
While a selloff of long-term U.S. Treasurys eased, analysts said the U.S. bond market remains vulnerable to selling pressure, which could lead to higher yields and more dollar-buying.
The U.S. Dollar Index , measuring the buck against a basket of six currencies, was up 0.1%, limited by safe-haven yen buying. The yengained then faded to trade little changed against the dollar after a 6.9-magnitude earthquake hit off the northeastern coast of Japan late afternoon U.S. time, on Monday.
Early Tuesday, the dollar was at Yen110.81 yen, compared with Yen110.84 late Monday in New York.
Immediately following the quake, and an ensuing tsunami warning, the market became "risk-averse," triggering yen-buying that eventually subsided, said Tohru Sasaki, head of FX research with J.P. Morgan in Tokyo.
But once it became clear the damage from the earthquake -- which took place near the stricken Fukushima nuclear power plant -- was limited, Asian stock markets rebounded and the dollar recovered. Any lasting impact from the earthquake on the foreign-exchange market is expected to be minimal, said Koji Fukaya, chief executive of FPG Securities in Tokyo.
The dollar's decline was likely also driven by Japanese exporters who had been waiting for an opportune momentto sell dollars, Fukaya said. Profit-taking on the dollar's recent gains emerged ahead of a public holiday Wednesday in Japan, and the U.S. Thanksgiving holiday on Thursday, he said.
Read:Here's when markets close on Black Friday (http://www.marketwatch.com/story/heres-when-markets-close-on-black-friday-2016-11-18)
The euro was at $1.0628 versus $1.0631 late Monday. The British pound was at $1.2489, compared with $1.2492 late Monday.
European Central Bank President Mario Draghi said that the return of inflation toward the bank's objective still relies on the continuation of the current, unprecedented level of monetary support, in spite of the gradual closing of the output gap.
"These comments strengthen expectations for an extension of the bank's [quantitative easing] program beyond March 2017 at its next month gathering" and add to negative-euro sentiment, said Charalambos Pissouros, currency strategist at IronFX Global. Read thelatest on European markets (http://www.marketwatch.com/story/brexit-boosted-rotork-and-miners-lead-european-markets-higher-2016-11-22).
(http://www.marketwatch.com/story/heres-when-markets-close-on-black-friday-2016-11-18)Meanwhile, U.S. President-elect Donald Trump outlined his plans for his first 100 days in office (http://www.marketwatch.com/story/donald-trump-vows-to-withdraw-from-tpp-on-day-one-2016-11-21), including formally declaring his intent to withdraw from the Trans-Pacific Partnership (TPP) trade deal and replace it with bilateral agreements.
"Even though this had no immediate market reaction, it eased [dollar] gains a bit, as it [tears up] any hopes for a softer protectionist stance on international trade," said Pissouros.
(END) Dow Jones Newswires
November 22, 2016 07:22 ET (12:22 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.