By Dow Jones Business News, October 08, 2013, 02:18:00 AM EDT
--Dollar weakness could persist for weeks to come amid US debt ceiling concerns
--Greenback may briefly fall below Y95, strategists say
--They remain bullish on pair in long-term, with dollar topping Y100 by year-end possible
By Takashi Mochizuki
The dollar sank to a fresh eight-week low against the yen on Tuesday in Asia as investor jitters continued to
strengthen amid concerns over the looming U.S. debt ceiling deadline.
While investors remain bullish on the greenback in the long-term, they acknowledge that they didn't expect the U.S.
political confusion to last this long, as Washington entered the eighth day of a partial shutdown.
"What's going on right now is just beyond what we thought could happen," said Takumi Nomura, a senior dealer at the
Bank of Tokyo-Mitsubishi UFJ.
As the dollar fell during Asian trading Tuesday, it hit Y96.70, its 200-day moving average, an important technical
threshold that hasn't been crossed since November last year when the fast-paced yen-weakening trend began. After
crossing the 200-day line, the greenback extended its decline to Y96.55, its lowest since Aug. 12. As of 0512 GMT, it
had pared back some of the falls to reach Y97.06.
"I still hold onto my long-term yen-weakening view, but it just gets difficult to fight against the yen-buying current
once the dollar clearly falls below that important line," Mr. Nomura said.
With the U.S. debt ceiling impasse unlikely to be resolved until very close to the deadline on Oct. 17, strategists
say investors should brace for more yen-buying momentum to come.
"It's highly possible the dollar will fall below Y95 over the coming month," said Tohru Sasaki, head of Japan rates &
FX research at JPMorgan Chase Bank in Tokyo.
In addition to the U.S. stalemate, Mr. Sasaki noted that trade talks over the Trans-Pacific Partnership could cast a
shadow over Japan's political arena, further propelling short-term speculators' yen buying. These investors have been
buying Japanese shares while selling the yen amid expectations that Japan's export-reliant economy may be in the process
of a large-scale overhaul.
The nation is keenly watching how its representatives are negotiating the TPP's handling of tariffs on sensitive
farming products for Japan, such as rice.
Mr. Sasaki said Prime Minister Shinzo Abe will face severe criticism if his administration fails to meet domestic
expectations. That would dent overseas faith in Mr. Abe's ability to push through economic reforms.
Still, Mr. Sasaki said expectations abroad for Japan are still high and it looks like Japanese investors are
interested in increasing their cross-boarder investment.
"Once all the concerns are out of the way, we still think the dollar will resume rising, and since its pace will
likely be fast, it's still possible we will see the dollar above Y100 by the end of this year," he said.
The WSJ Dollar Index was at 72.393.
Interbank Foreign Exchange Rates At 00:50 EST / 0450 GMT
Latest Previous %Chg Daily Daily %Chg
2150 GMT High Low 12/31
USD/JPY Japan 97.04-08 96.69-73 +0.36 97.12 96.58 +11.89
EUR/USD Euro 1.3557-60 1.3580-83 -0.17 1.3581 1.3558 +2.75
GBP/USD U.K. 1.6070-74 1.6095-99 -0.15 1.6099 1.6072 -1.07
USD/CHF Switzerland 0.9048-52 0.9026-30 +0.24 0.9052 0.9028 -1.12
USD/CAD Canada 1.0322-26 1.0310-15 +0.11 1.0328 1.0314 +4.00
AUD/USD Australia 0.9435-38 0.9427-31 +0.08 0.9448 0.9414 -9.20
NZD/USD New Zealand 0.8306-10 0.8302-08 +0.04 0.8312 0.8272 +0.37
EUR/JPY Japan 131.60-64 131.33-37 +0.21 131.70 131.14 +15.00
Source: ICAP PLC
Write to Takashi Mochizuki at email@example.com
(END) Dow Jones Newswires
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