Yen weakens after Suga comments

The US dollar extended gains versus the yen for a second day but is on track for a weekly loss due to a slightly more dovish Federal Reserve at its policy meeting earlier this week. The Fed signaled that the pace of any further rate hikes going forward will likely be even slower and more gradual than previously forecast and this led to a retrenchment in the dollar index and a rally in equity markets this week.

US data out on Thursday showed weekly jobless claims improved but existing home sales unexpectedly fell. The dollar steadily rose against the yen to reach a high of 101.23 yen in today’s Asian session.

The yen was softer despite preliminary data from Japan today indicating there was a rise in Japanese manufacturing activity this month. The September flash manufacturing PMI rose to 50.3 from 49.5 in August and beat expectations for an uptick to 49.3. Despite the upbeat data the yen weakened as investors feared that Japanese officials may intervene to counter appreciation in the currency especially after Japanese Chief Cabinet Secretary Yoshihide Suga’s comments today. Meanwhile, Goldman Sachs (NYSE:GS) expressed its bearish view on the yen and this also weighed on the currency.

The New Zealand dollar was one of the worst performing major currencies in Friday’s Asian session due to expectations that the RBNZ will cut interest rates soon after signaling more easing following a policy meeting on Thursday. The kiwi slid to a session low of $0.7268.

The euro reversed yesterday’s gains versus the dollar that took it to a high of $1.1256. The single currency slid to $1.1193. Focus turns to Eurozone PMI data on the manufacturing and services sector later today.

Gold fell for the first time this week, trimming its best weekly advance since July. A low interest rate environment is driving demand for the precious metal which reached a high of $1343.53 on Thursday before easing to $1333.74 in Asian trading today.

Oil retreated from a two-week high as investors are concerned whether major oil producers will agree on freezing output levels in a meeting next week in Algiers. Crude fell to $45.75 a barrel today after hitting $46.50 yesterday.