The dollar plunged by the steepest margin against the yen in 13 weeks after the Federal Reserve seemed not to be in a hurry to increase interest rates despite the improving economic conditions.
The dollar plunged 0.7 percent last week to trade at 101.30 yen in New York, its biggest drop since the week through April 11. The greenback fell 0.1 percent to $1.3608 per euro while the yen advanced 0.6 percent to close at 137.90 per euro after earlier rallying to 137.50, its highest level since February 6.
The yen also rose after a Portuguese bank defaulted on its debt repayment, spurring demand for haven assets. Banco Espirito Santo SA defaulted on short-term debt, though it moved in to reassure the market. The Bank of Portugal told investors the bank is protected.
The dollar edged lower after minutes of Federal Open Market Committee meeting in June contained no information on when interest rates may be increased.
“Slightly dovish FOMC minutes were the first trigger,” Masafumi Takada, a director at BNP Paribas SA in New York told Bloomberg. “Declining U.S. yields as well as ongoing geopolitical risk aversion are putting pressure on dollar-yen.”
The yield on the key U.S. Treasury 10-year note fell 12 basis points to 2.49 percent, its weakest level since June 2. The Federal Reserve Chair Janet Yellen is expected to address the Senate Banking Committee on July 15 in Washington and thereafter testify before the House Committee on Financial Services the next day.
Last week, the Labor Department reported that jobless claims fell by 11,000 to 304,000 in the week through July 5. The data, along with another one that indicated payrolls grew more than expected in June and jobless rate was near a six-year low, indicates that the economy is set to record stronger growth in the second-half of the year. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.
To contact the reporter of this story; Jonathan Millet at firstname.lastname@example.org