Dollar Touches Five-Week High Versus Yen as It Tests Resistance

(Bloomberg) -- The dollar touched a five-week high against the yen as investors fine-tune positions ahead of a speech by Federal Reserve Chair Janet Yellen.

Traders bought the greenback versus the yen, pushing the currency pair to 112 at the Tokyo fix, the highest level since May 24. Large buy-stops were layered above that level at 112.13, according to traders who asked not to be identified as they aren’t authorized to speak publicly.

The dollar has been supported since the Fed raised interest rates in June for the second time this year and elaborated on its plans to shrink its balance sheet. San Francisco Fed President John Williams made the case on Monday for further gradual increases in interest rates, with the expectation that inflation will rise to the central bank’s target next year. Yellen leads a slate of speakers from the U.S. central bank this week.

"There is a technical tailwind supporting dollar-yen,” said Kumiko Ishikawa, a currency market analyst at Sony Financial Holdings Inc. in Tokyo. If markets can hold around the May 24 high into the New York trading hours, the currency pair could break upward depending on the outcome of data and remarks from Yellen, she said. The U.S. June Conference Board consumer confidence data is due Tuesday.

  • USD/JPY rises as much as 0.2% to 112.08 before paring gains; trades in 111.83-112.08 range
    • Large exporter selling at 112 level taken out, minor stop-entry trades for leveraged accounts just above also triggered, according to an Asia-based FX trader
    • Since breaking above the 111.82 Ichimoku cloud resistance, spot has hit a more than 1-month high and uses the cloud as base support
    • Foreign ownership of Japanese T-bills hits record 51.9% in March, according to data from BOJ Tuesday
  • USD/CAD adds 0.1% to 1.3250 versus 1.3242-1.3261 range
    • U.S. Commerce Department announces more duties on imports of Canadian softwood lumber
  • NZD/USD steady at 0.7294, as it recovered from sell-off reaction to May trade surplus of NZ$103m missing estimates of NZ$419m
  • 2-year U.S. Treasury yields up 2bps to 1.357%; 10-year benchmark little changed at 2.137%
    • The bond market has become “overly bearish” on expectations for growth for the second half of the year, according to John Woods, Credit Suisse Group AG’s Hong Kong-based chief investment officer for the Asia-Pacific region

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