The dollar jumped nearly three-quarters of a percent against the yen on Monday as investors bought back the cheapened greenback following its slide after poor US trade number on Friday. Some analysts said rising US Treasury yields and investors' nervousness over the build-up of short positions on the dollar in the market was supporting the greenback. "The dollar is enjoying a better morning but it's not fundamentally driven.
Friday's news was dollar negative but it did not carry through," said Daragh Maher, senior forex strategist at Calyon.
Data on Friday showed the US trade deficit widened in January to $58.3 billion, its second-highest monthly total on record.
The market shrugged off an upward revision to Japanese growth data and focused instead on the country's narrowing current account surplus.
Japanese gross domestic product for the last quarter of 2004 was revised up to show growth of 0.1 percent from an initial 0.1 percent contraction.
Overall, net dollar short positions declined in the week to March 8, according to the latest data from the Commodity Futures Trading Commission, but some traders said the level of dollar shorts remained very high.
"I think positioning played a role today given the extent of the move," said Riz Din, foreign exchange strategist at Barclays Capital.
At 1310 GMT, the dollar was up 0.72 percent against the yen at 104.74 and up over 0.5 percent versus the euro at $1.3378.
UBS in a research note said it remained bearish on the dollar and suggested the greenback was unlikely to find solace in rising bond yields.
Ten-year US Treasury yields are hovering near their highest levels in about 7-1/2 months.
"We remain bearish on the dollar and target euro/dollar at 1.36 over 3-months and dollar/yen at 103," analysts at UBS said.
The market will be scanning US capital flows figures on Tuesday and current account data on Wednesday to gauge investor sentiment towards the dollar.
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