LONDON: The dollar pared its gains against the yen in directionless Asia trade Friday after chalking up a three-week high, with investors finding it hard to move beyond a week-long rally that brought the greenback about 3% higher.
At around 0450 GMT, the greenback stood at Y124.08, compared with Y124.14 late Thursday in New York.
The U.S. currency was tracking its strength overnight and briefly touched as high as Y124.23 midday, its highest since June 24, underscoring the demand for dollars from Japanese importers and others related to regular commercial settlement before a three-day weekend in Japan.
But market participants pointed out a sense of overheating in the rally that inflated the value of the dollar from a low of Y120.41 Thursday last week.
What caused the dollar’s uptick was receding fears about the Greek debt crisis and the slump in Chinese stocks. Comments by Federal Reserve Chairwoman Janet Yellen–who since late last week has reaffirmed the central bank’s plan to start raising short-term rates later this year–also helped.
Speaking to the Senate Banking Committee a day after appearing before the House Financial Services Committee, on Thursday she said the U.S. labor market had moved demonstrably closer to a more normal state, a reason why the central bank is likely to raise short-term interest rates later this year.
The dollar buying “is calming down” after considerable gains since last week, said Shinichiro Kadota, vice president of research at Barclays in Tokyo.
