By Suryatapa Bhattacharya

TOKYO--The dollar strengthened against the yen Wednesday in Japan for a second straight day, albeit in thin trade, after the release of encouraging U.S. economic data.

The dollar rose 0.2% against the yen after data showed U.S. consumer confidence climbed to its highest level in 15 years. The rise of the dollar was supported as U.S. Treasury yields rose Tuesday in response to the strong data.

Still, markets trading in Japan remained thin during the last week of the year as investors stayed away from unwinding their exposure to the U.S. dollar, given the short-term rate rise that has allowed them to earn as much as 1% yield on theirinterbank interest rates, said Yunosuke Ikeda, foreign-exchange strategist at Nomura.

"Today's yen weakening is not reflecting anything fundamental" happening in Japan markets, said Mr. Ikeda. "With thin trade volumes this time of the year, I don't want to take anything away from this small spike," he said.

Mr. Ikeda's forecast for the end of 2017 for the dollar-yen pair is 120, based on expectations that the U.S. Federal Reserve will raise rates twice. "In the case of three rate hikes, our target should be 125," he added.

"We feel the worst period is almost over for USD/JPY basis as the risk of further rate cut in Japan has receded," a J.P. Morgan investor note said, although the pair is predicted to decline from its current levels next year. Also, a "tightening pressure on USD/JPY basis" is expected, according to the investor note. The pair is predicted to hover around current levels in the last few days of this year.

The euro wasat $1.0470 as of 0450 GMT, up from $1.0450 late Tuesday in North America, according to EBS. The dollar was at 117.69 yen, up from Y117.52. The British pound was at $1.2288, up from $1.2266.

Latest Previous %Chg Daily Daily %Chg

Dollar Rates Close High Low 12/31

USD/JPY Japan 117.62-63 117.42-43 +0.17 117.75 117.41 -2.22

EUR/USD Euro 1.0469-72 1.0456-59 +0.12 1.0477 1.0455 -3.59

GBP/USD U.K. 1.2285-87 1.2270-72 +0.12 1.2296 1.2266 -16.63

USD/CHF Switzerland 1.0273-77 1.0278-82 -0.05 1.0283 1.0268 +2.54

USD/CAD Canada 1.3570-75 1.3573-78 -0.02 1.3582 1.3562 -1.92

AUD/USD Australia 0.7201-05 0.7182-86 +0.26 0.7209 0.7180 -1.15

NZD/USD New Zealand 0.6915-21 0.6886-92 +0.42 0.6928 0.6889 +1.24

Euro Rate

EUR/JPY Japan 123.14-18 122.79-83 +0.28 123.25 122.72 -5.83

Source: ICAP PLC

Write to Suryatapa Bhattacharya at

(END) Dow Jones Newswires

December 28, 2016 01:27 ET (06:27 GMT)

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