LONDON: The dollar plunged across the board on Tuesday, on track for its largest one-day loss against the yen since June 2013, as investors sought the Japanese currency's safety amid uncertainty in Greece and the weak trend in oil.
Investors tend to buy the yen in times of geopolitical or economic stress, but the overall outlook for the Japanese currency stayed downbeat as the economy is still in the midst of massive quantitative easing. Sliding global stocks, a result of soft oil prices in general and poor Chinese data on Monday, prompted investors, who had sold the yen in recent days, to rush to cover their positions.
The dollar, meanwhile, fell for the second straight session as investors booked further profits on its sharp gains of the past few weeks. Market participants, however, remained upbeat about the currency's prospects, with the U.S. economy inching closer to its first rate increase since the global financial crisis.
"It's generally position-squaring in the dollar going into the last two weeks of the year," said currency strategist Mark McCormick of Credit Agricole in New York. "The market has had huge long dollar positions the last two quarters, and traders are taking this opportunity to lighten up those positions."
Cautious comments from U.S. Federal Reserve policymakers late Monday have also taken the shine out of the dollar's luster.
Dennis Lockhart, head of the Atlanta Federal Reserve, said he was in no rush to drop the Fed's pledge to keep interest rates near zero for a "considerable time", while San Francisco Fed chief John Williams said the phrase was still appropriate.
Against the yen, the dollar dropped 1.9 percent to 118.35 yen, pulling further away from a seven-year high of 121.86 yen set on Monday. The Japanese currency also rose against the euro, which shed 1.0 percent to around 147.20 yen .
The dollar also fell 0.9 percent against the Swiss franc, another safe-haven currency, to trade at 0.9668 franc.
The euro rose 0.9 percent to $1.2425, but was not far from a 28-month low of $1.2247 hit on Monday.
The currency showed little reaction to early presidential elections being called in Greece, though Greek bond yields moved sharply higher and analysts said it was another negative factor that could push the euro lower in coming weeks.
Against a basket of currencies, the dollar fell 0.8 percent to 88.313, having hit a five-year high on Monday.
Comments
Comments are closed for this article.