Dollar Pares Drop, Yen Extends Fall as Kuroda Sees QE Continuing

(Bloomberg) -- The dollar pared earlier weakness to briefly turn positive, popping as Treasury Secretary Steve Mnuchin said his department is close to unveiling a tax-reform plan.

The greenback was down less than 0.1% after Mnuchin said tax reform will be sweeping and the Trump administration hopes it won’t take until the end of the year. The dollar rose to a fresh session high of 109.49 against the yen, which declined versus most of its G-10 peers. Bank of Japan Governor Haruhiko Kuroda reiterated that the current program of quantitative easing will stay in place for some time even as the economy is growing above potential.

Dollar Pares Drop, Yen Extends Fall as Kuroda Sees QE Continuing
  • The Japanese currency saw choppy trading in the session; Kuroda, in an interview with Bloomberg Television, said that he doesn’t see any constraint on BOJ policies and underscored that the yen exchange rate can influence inflation, as a stronger currency could delay reaching the central bank’s 2 percent goal.
  • The yen had already dropped to session lows vs the dollar and other peers before the governor’s remark sent the currency spiraling to fresh lows against the greenback, the euro and several others. Yen losses Thursday are a reversal of recent gains and were driven by stop-loss-fueled selling as investors unwound haven trades that had supported the Japanese currency since the start of the month
  • USD/JPY trading ~109.29 vs fresh session high 109.49 reached as Mnuchin spoke. The euro rose ~0.5% against the yen, earlier touching its highest since April 10, as traders pared back bearish euro bets ahead of the first round of French presidential elections this weekend
  • EUR/USD trading at ~1.0723 after rising to 1.0778, its highest since March 29, before offers capped. EUR resilience ahead of the presidential election this week has surprised many, given the race remains too close to call among 4 leading candidates; some investors may be paring back euro bearish bets, traders say. The latest Harris-LCP poll showing Macron consolidating with 24.5% first-round support might also be helping to buttress the euro
  • USD/CAD trading ~1.3473 after earlier hitting a 5-week high at 1.3500 as WTI oil relinquished slight gains while approaching $50/bbl. USD capped by layered offers that extend from ahead of 1.3500 up to 1.3550, trader in Toronto said; breach of that higher mark may see model-driven demand emerge