Dollar Hits 6-Week Low VS Yen Ahead Of UK Vote, Comey Testimony And ECB Outcome

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TOKYO, Jun 6 – The dollar hit a six-week low against the safe-haven yen on Tuesday, with investors cautious ahead of Britain’s election, a European Central Bank meeting and former FBI Director James Comey’s testimony to a Senate committee this week. 

The dollar was down 0.7% at 109.700 yen after brushing 109.660, its lowest since April 25. Initially buoyed by an overnight bounce in US yields, it had briefly risen to 110.510 early in the session. The greenback has been firmly on the defensive since Friday’s weaker-than-expected US non-farm payrolls report prompted investors to pare back expectations of future interest rate increases by the Federal Reserve.

“It’s difficult to pinpoint a single factor but the UK elections and Comey’s testimony will take place on the same day, which is making the market nervous. The dollar is already on the defensive after Friday’s jobs data, and now it’s facing potential geopolitical risk in the form of Comey’s testimony,” said Bart Wakabayashi, Tokyo Branch Manager of State Street Bank, referring to both events set for Thursday.

Comey, the FBI director fired by US President Donald Trump in May, will be grilled by the Senate Intelligence Committee on whether Trump tried to get him to back off an investigation into alleged ties between the president’s 2016 campaign and Russia. In Britain, the latest opinion poll by Survation for ITV television showed Prime Minister Theresa May’s lead over the opposition Labour Party holding at just one percentage point ahead of Thursday’s election.

Sterling was 0.2% higher at US$1.2927 (RM5.51) following its rise overnight to a 10-day peak of US$1.2940. The euro pared overnight losses and rose 0.2% to US$1.1275, edging back towards a seven-month high of US$1.1285 reached on Friday. The common currency’s advance was relatively slow as a wait-and-see mood prevailed ahead of Thursday’s European Central Bank policy meeting, which is likely to result in another baby step towards removing the extraordinary monetary stimulus.

The dollar index against a basket of major currencies went as low as 96.560, its weakest since Nov. 9. The Australian dollar bounced from an earlier dip to last trade at US$0.7490, little changed on the day, after the Reserve Bank of Australia kept interest rates at a record low of 1.5%, as expected, while their economic assessment was not as bearish as some had braced for. The Aussie had earlier fallen to US$0.7457 after Australia posted current account data for January-March. The deficit was the smallest in more than 15 years, but it still disappointed investors who had hoped for a rare surplus. — Reuters

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