By Hiroyuki Kachi
The U.S. dollar was a tad lower but kept intact much of its overnight gains against the yen during late morning Asia trade on Thursday, with investors becoming increasingly mindful of the interest-rate differential between the U.S. and Japan.
The dollar maintained upside momentum to touch 105.96 yen early in the session, its highest level since July 27. It later lost some ground on profit-taking, which briefly pulled it below Y105, before trading at Y105.23 around 0250 GMT. That compared with Y105.66 late Wednesday in New York.
After a stunning upset in the U.S. presidential election Wednesday, the yield on 10-yearU.S. Treasurys crossed 2% for the first time in eight months as investors bet on a Donald Trump administration boosting fiscal spending. Such an approach is inflationary and means more government debt, a combination that pushes up U.S. bond yields.
"That's supportive to the dollar against the yen without any question," said Daiwa Securities senior foreign-exchange strategist Yukio Ishizuki.
Tokyo stocks bounced back after an overnight rally on Wall Street, prompting investors to move away from the safety of the Japanese currency. The benchmark Nikkei Stock Average shot up 5.7%.
"I think the market should regret what they had focused," as investors only saw potentially bad aspects under a Trump administration, said Daisaku Ueno, chief forex strategist at Mitsubishi UFJ Morgan Stanley, referring to the dollar's steep recovery after Mr. Trump's victory. The dollar touched as low as Y101.19 in mid-afternoon trade in Asia, hours before theelection outcome.
"But I doubt the sustainability of higher U.S. yields, stocks and the dollar," given potentially growing fears about the government budget deficit, said Mr. Ueno. "Stocks are higher now in an initial reaction. But it remains to be seen if the economy will be getting stronger."
Mr. Ueno said the dollar may keep its strength for now before Mr. Trump's inauguration in January, but it has yet to turn into an uptrend. While U.S. Treasury yields returned to levels last seen earlier this year, the dollar continues to hover around Y105, much lower than the Y120 level at which it traded at the beginning of the year.
The euro gained to $1.0945 in late morning Asia session from $1.0907 late Wednesday.
The WSJ Dollar Index, a measure of the U.S. dollar against a basket of major currencies, was down 0.22% at 88.70.
Interbank Foreign Exchange Rates At 21:50 EST / 0250 GMT
Latest Previous %Chg Daily Daily %Chg
Dollar Rates Close High Low 12/31
USD/JPY Japan 105.20-21 105.66-67 -0.44 105.95 104.97 -12.54
EUR/USD Euro 1.0943-46 1.0909-12 +0.31 1.0955 1.0909 +0.77
GBP/USD U.K. 1.2416-18 1.2405-07 +0.09 1.2439 1.2395 -15.74
USD/CHF Switzerland 0.9826-30 0.9843-47 -0.17 0.9852 0.9821 -1.92
USD/CAD Canada 1.3407-12 1.3421-26 -0.10 1.3426 1.3404 -3.10
AUD/USD Australia 0.7658-62 0.7632-36 +0.34 0.7668 0.7631 +5.12
NZD/USD New Zealand 0.7296-302 0.7277-83 +0.26 0.7306 0.7273 +6.82
EUR/JPY Japan 115.11-15 115.25-29 -0.12 115.69 114.97 -11.97
Source: Tullett Prebon
Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com
(END) Dow Jones Newswires
November 09, 2016 23:15 ET (04:15 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.