Tokyo: The yen edged down against the dollar on Friday, 2 November, shrugging off a drop in Asian stocks, as investors awaited US jobs data to shed light on what the Federal Reserve may do at its next policy meeting in December.
The yen gained across the board the previous day after renewed fears of more subprime problems sparked a stock sell-off, sapping investors’ risk appetite and prompting unwinding of yen carry trades.
But the currency’s rally was short-lived as investors realized there were few reasons to buy the low-yielding Japanese currency other than to square carry trades, given expectations the Bank of Japan will take its time in raising interest rates.
Market players ignored a sharp drop in Tokyo’s Nikkei share average on Friday. The Nikkei ended the morning down 1.71% at 16,581.27, tracking US shares lower.
The Dow Jones industrial average and S&P 500 index both tumbled 2.6% Thursday after brokerages downgraded Citibank and Bank of America, sparking fears of more credit crisis fallout.
Trading activity was subdued as the market awaited US employment figures due 1230 GMT that could sway views on what the Fed will decide at its 16 December meeting.
The dollar rose 0.2% versus the yen to 114.87 yen
“If the US jobs data is weaker than expected, expectations for a December rate cut will be rekindled,” said a trader at a Japanese bank.
The Fed cut interest rates by 25 basis points to 4.5% earlier this week but moderated expectations for further cuts, saying inflation risks are equal to chances of slower growth.
The euro was up 0.1% against the dollar at $1.4440 The European single currency topped $1.45 on Wednesday for the first time since its launch in 1999, logging a record high of $1.4508 on trading platform EBS.
The euro climbed 0.4% against the yen to 165.93 yen but was still well below a lifetime high of 169.05 yen reached in late July.
Economists expect the US economy to have created 80,000 jobs in October after an increase of 110,000 in September. The employment rate is seen staying at 4.7%.