By Hiroyuki Kachi
The dollar weakened sharply against the yen and other currencies in Asia trade Monday as renewed uncertainty over the direction of oil production amplified a wave of profit-taking from a post-U.S. election surge.
The U.S. currency fell more than 1.6% against the yen as jitters over the direction of oil production presented investors with a clear moment to cash in gains made from the rally powered by Donald Trump's election victory.
Saudi leaders have backed out of a Monday meeting between OPEC members and other non-OPEC producers including Russia, strengthening doubts that an effective deal can be reached on reining in production at Wednesday's main OPECmeeting.
"Guys are very, very nervous about the oil scenario and you see that expressed in the sensitive [currency] pair," said Stephen Innes, a senior foreign-exchange trader at Oanda. That uncertainty was pushing investors into the perceived safety of the yen, he added.
A raft of U.S. economic data due this week also strengthened the case for profit-taking after the initial feel-good expectations for a stimulus driven Trump presidency appeared to have run its course for now.
"What we are seeing is unwinding of positions excessively built up recently," said Marito Ueda, director at FX Prime byGMO.
Around 0315 GMT, the U.S. currency was changing hands at Y111.86, after sliding as low as Y111.35 earlier in the morning session, compared with Y113.20 late Friday in New York. The dollar also slipped against other currencies in Asia including the Chinese yuan and the Singapore dollar, though the move against the yen was the sharpest. TheWSJ Dollar Index, a measure of the U.S. dollar against a basket of major currencies, was down 0.57% at 91.26. The euro was at $1.0657 from $1.0575 late Friday.
The dollar has staged a strong rally following Mr. Trump's election victory, on expectations that the new administration will boost fiscal spending and lower taxes in a move that could accelerate inflationary pressure. That would likely prompt the Federal Reserve to raise short-term rates more often than previously expected.
While investors can go along with some of the recent rises that pushed the dollar to an eight-month high against the yen last week, they can't explain the entire strength of the surge, said FPG Securities chief executive Koji Fukaya. The U.S. stock market's recent gains are based only on expectations, while higher U.S. yields that have been pushing up dollar eventually will put a brake on the U.S. economy, he said.
"I don't expect the rosy scenario of Trumponomics--this Trump rally--to persist. Investors need to be prepared for a turnaround and turbulence in the market," he said.
Mizuho Securities chief FX strategist Kengo Suzuki said the greenback would continue to show vulnerability to selling pressure after the recent rally.
"It's highly possible that an adjustment phase has already kicked off," he said.
Still, in addition to the OPEC meeting, the greenback has a slew of other events and economic indicators later this week to factor in, ranging from U.S. ISM manufacturing data and the monthly jobs report to Italy's referendum, said Mr. Suzuki. Those factors are likely to shape the direction of the dollar over the coming week, determining whether the Trump surge renews or dissipates.
Interbank Foreign Exchange Rates At 21:50 EST / 0250 GMT
Latest Previous %Chg Daily Daily %Chg
Dollar Rates CloseHigh Low 12/31
USD/JPY Japan 111.67-68 113.21-22 -1.36 113.22 111.36 -7.16
EUR/USD Euro 1.0666-69 1.0589-92 +0.73 1.0686 1.0591 -1.78
GBP/USD U.K. 1.2524-26 1.2476-78 +0.38 1.2530 1.2465 -15.00
USD/CHF Switzerland 1.0083-87 1.0139-43 -0.55 1.0141 1.0079 +0.65
USD/CAD Canada 1.3466-71 1.3521-26 -0.41 1.3524 1.3462 -2.67
AUD/USD Australia 0.7467-71 0.7442-46 +0.34 0.7477 0.7433 +2.50
NZD/USD New Zealand 0.7082-88 0.7038-44 +0.62 0.7091 0.7041 +3.69
EUR/JPY Japan 119.12-16 119.77-81 -0.54 119.79 118.83 -8.91
Source: Tullett Prebon
--Kenan Machado contributed to this article.
Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com
(END) Dow Jones Newswires
November 27, 2016 22:41 ET (03:41 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.