The dollar edged down against the yen on Thursday after lacklustre US economic data pushed Treasury yields lower and dulled investor appetite for the greenback. The dollar was down 0.2 percent at 117.555 yen, continuing its slow retreat from a seven-year high of 118.98 struck a week ago. Wednesday's disappointing US consumer, housing and manufacturing data pushed the benchmark 10-year US Treasury note yield to a one-month low.
"Market participants are taking this opportunity to trim some of their accumulated dollar long positions. As far as dollar/yen is concerned, there is also firm bargain-hunting demand on dips, keeping the pair in range as the market heads into US Thanksgiving," said Junichi Ishikawa, a market analyst at IG Securities in Tokyo. US financial markets are closed on Thursday for Thanksgiving, with many US traders expected to take Friday off, although markets will be open. "For dollar/yen to go on offensive again, we may have to wait for next week's batch of US data, notably the non-farm payrolls," Ishikawa said. Divergence of US and Japanese monetary policies and a surge by Tokyo's Nikkei to multi-year peaks helped the greenback soar to the seven-year high against the yen.
Many market participants, particularly foreign investors, sell yen to hedge their equities positions, so the dollar tends to gain whenever stocks rise. But Tokyo stocks have lost steam amid political uncertainty in Japan, where Prime Minister Shinzo Abe dissolved the lower house of parliament last week and called an election in December. Hints of concern by Japanese officials over the yen's weakness and a steady drop in Treasury yields have also weighed on the dollar.
The euro stood little changed at $1.2503. The common currency almost touched a four-year trough of $1.2358 on Monday after European Central Bank President Mario Draghi threw the door open for more drastic easing measures. But the euro has bounced back, gaining close to one percent so far this week, as expectations of immediate ECB action have ebbed. "The consensus last week was that the ECB would begin buying bonds in December. But the consensus has changed this week in light of comments by officials like ECB's Constancio, and the euro was bought back as the ECB may stand pat in December after all," said Daisuke Karakama, chief market economist at Mizuho Bank in Tokyo.
Prospects for the ECB launching bond buying in December were curbed after ECB Vice President Vitor Constancio said on Wednesday that the central bank will be able to gauge whether it needs to start buying sovereign debt to stimulate the euro zone economy in the first quarter of next year. The market looked to a speech by ECB's Draghi later in the session for potential hints on the timing of the bond buying launch. The Australian dollar rose 0.3 percent to $0.8572 after paring modest losses in response to better-than-expected capex data.
Australia's new capital expenditure rose 0.2 percent in the third quarter although economists polled by Reuters had expected a decline of 1.5 percent. The indicator helped the Aussie crawl away from a four-year low of $0.8480 struck on Wednesday, following comments from a Reserve Bank of Australia official that the currency was overvalued.
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