LONDON: The U.S. dollar fell to the lower 121 yen zone Monday morning in Tokyo as a sharp fall in Tokyo stock prompted traders to cash in on its robust gains induced by remarks from a senior Federal Reserve official over a U.S. rate hike.
At noon, the dollar fetched 121.08-14 yen compared with 121.65-75 yen in New York and 120.75-77 yen in Tokyo at 5 p.m. Friday.
The euro was quoted at $1.1240-1242 and 136.12-18 yen against $1.1183-1193 and 135.73-83 yen in New York and $1.1296-1298 and 136.40-44 yen in Tokyo late Friday afternoon.
The dollar pared its gains in the morning after climbing nearly 1 yen to the upper 121 yen zone on Friday in New York following Fed Vice Chairman Stanley Fischer’s remarks that suggested the door was still open to an interest rate increase at the U.S. central bank’s next policy meeting in September.
“A U.S. rate hike in September was once thought almost impossible due to worries about the Chinese economy. But given Mr. Fischer’s remarks, such expectations, at least a rate hike within this year, have revived,” said Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow.
On the dollar’s retreat in the morning, Sakai added, “With the dollar having recovered well from its plunge to the 116 yen level last week, some people were willing to lock in profits at the 121 yen level.”
Traders were generally reluctant to take risks given another sharp fall in Tokyo shares following recent roller-coaster trading. Thus buying of the yen, deemed a relatively safe asset, took the upper hand against the dollar, dealers said.
The 225-issue Nikkei Stock Average shed 200.75 points, or 1.05 percent, from Friday to end the morning at 18,935.57 following the release of disappointing Japanese industrial output data.
The dollar also lost ground against the euro following its large gains on Friday on Fischer’s remarks.
