LONDON: The dollar was unable to shake off the previous session’s lows on Friday and was set for a weekly fall, losing out to the Japanese yen in particular, which hit a seven-week high as investors sought the safe-haven currency. Data released on Thursday showed that the number of people in the United States filing new claims for unemployment benefits fell less than expected, suggesting the country’s market recovery is stalling.
The dollar – which had been boosted by the Federal Reserve upgrading its 2020 economic forecast earlier this week – gave up those gains, and was flat versus a basket of currencies, at 1049 GMT, set for a weekly loss of around 0.4%.
The Japanese yen gained against the dollar, hitting a new seven-week high of 104.270 at 1008 GMT, before easing to 104.325 per U.S. dollar by 1050 GMT, down 0.4% on the day JPY=EBS.
“This move is mainly about the dollar,” Rabobank senior FX strategist Jane Foley said, noting that the yen had moved less against other currencies in recent months.
“This is one to be watching closely because there is a lot of political uncertainty and there is a lot of geopolitics and I think this is going to be increasingly seen as we go into the last months of this year and as we go into next year,” she said.
The upcoming U.S. election, as well as China’s worsening relations with the United States and India, are all contributing to the demand for the yen, Foley said.
At its meeting, the Bank of Japan maintained its -0.1% short-term interest rate target and a pledge to cap 10-year bond yields around zero, as widely expected.
Tokyo markets will be closed on Monday and Tuesday next week, so investors positioning for thin liquidity could also have played a role in Friday’s yen move.
There was still some risk appetite in currency markets, as the New Zealand dollar strengthened overnight and hit its highest in a year and a half in early London trading, after the country’s finance minister sounded positive about the economy in television interviews.
“Given these optimistic comments and the ‘risk-on’ tone in stock markets in Asia this morning, I think we could see further gains in NZD,” Marshall Gittler, head of investment research at BDSwiss Group, wrote.
The Reserve Bank of New Zealand meets next week. The governor has said that the policy rate will stay at 0.25% until next March.
At 1059 GMT, the New Zealand dollar was at 0.6782 versus the U.S. dollar, up 0.5% on the day NZD=D3.
The Australian dollar was flat versus the U.S. dollar, at 0.73100 AUD=D3.