By Masayuki Kitano
TOKYO, May 15 (Reuters) - The dollar slipped slightly but
hovered near a two-month high against the yen on Thursday after a
tame reading for U.S. consumer inflation buoyed stock markets and
bolstered risk appetite.
Steady gains in Wall Street shares, rising U.S. bond yields
and a growing perception that the worst of the credit crisis may
be over were supporting the dollar against the low-yielding yen.
"With equities and credit markets showing some stability, it
is becoming easier to buy the dollar," said a trader for a
Japanese bank.
The dollar also scaled a four-month high against the New
Zealand dollar, which took a hit from data showing that New
Zealand retail sales fell at their fastest pace in 11 years in
the first quarter. []
The dollar dipped 0.1 percent from the level in late U.S.
trading on Wednesday to 104.88 yen <JPY> after having clawed back
towards the peak of around 105.70 yen hit earlier in May.
The euro edged up 0.1 percent to $1.5493 <EUR=> and was
little changed at 162.44 yen <EURJPY=R> as investors awaited data
on euro zone gross domestic product for the first quarter and
final inflation for April due later on Thursday. []
The kiwi was down 0.4 percent at $0.7575 <NZD=D4> after
earlier hitting a four-month low of $0.7550.
The dollar has been supported by market expectations for the
Federal Reserve to pause lowering interest rates and to start
raising them later in the year as the central bank focuses on the
threat from inflationary pressures. <FEDWATCH>
San Francisco Fed President Janet Yellen said on Wednesday
that rates have "come way down" in recent months, and with
inflation looming the central bank's key lending rate has
probably been cut enough for now, despite risks to growth.
[]
POSITION UNWINDING?
U.S. consumer prices rose a smaller-than-expected 0.2 percent
in April, giving a boost to stocks while hurting Treasuries.
[]
Share prices are regarded as a barometer of investors'
appetite for risky carry trades, which involve selling
low-yielding currencies like the yen to invest in higher-yielding
currencies and assets.
Despite the dollar's rebound against the yen this week, some
traders said the scope for further gains may be limited in the
near term.
"We are now near the top of the current range. I think the
core range is between 100 yen to around 105 yen or 106 yen," said
Yuji Matsuura, joint general manager for Aozora Bank's forex and
derivatives trading group.
The dollar's rise against the yen may have been due to
profit-taking by hedge funds, Matsuura said, adding that the
dollar could lose some momentum once such position unwinding
subsides.
"Today is the 15th and the last day of the 45-day notice
period," he said, referring to the advance notice that clients
need to give hedge funds to withdraw money at the end of the
April-June quarter.
"I think there was probably some profit-taking and
repatriation flows back into the dollar ahead of that," he said.
Thursday is also when some $95 billion in coupon payments and
maturities of U.S. Treasuries are due.
Some traders say speculation about the potential for fund
repatriation by Japanese investors ahead of such coupon payments
and bond redemptions, was a factor behind the dollar's fall
against the yen earlier this week.
Traders are focusing on whether such repatriation flows will
appear once investors actually receive the proceeds on Thursday.
