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The dollar held steady near a three-month high against the yen on Thursday, as rises in US bond yields and expectations for the Federal Reserve to raise interest rates this year helped underpin the greenback.
The dollar last stood at 104.49 yen. Earlier on Thursday, it rose to as high as 104.695 yen, nearing a three-month peak of 104.875 yen set on Tuesday.
Helping to bolster the greenback’s appeal, the US 10-year Treasury yield rose to 1.813 per cent at one point in Thursday’s Asian trade, the highest since October 17.
“It’s purely a US yield story,” said Tan Teck Leng, FX strategist for UBS Wealth Management in Singapore, referring to the dollar's recent rise against the yen.
BoJ monetary policy
With the Bank of Japan seen likely to keep its monetary policy steady for a while and to stick to its pledge to guide 10-year government bond yields around zero per cent, US bond yields will be the main driver for dollar/yen, Tan said.
The market is pricing in a 74 per cent chance that the Fed would raise rates by December, according to CME Group’s FedWatch tool.
The dollar index edged up 0.1 per cent to 98.692, staying below a nine-month high of 99.119 set on Tuesday.
Sterling eased 0.3 per cent to $1.2213, but remained above an 18-day low of $1.2082 plumbed on Tuesday.
UK GDP data
The market will look to the third quarter UK GDP data due later in the day for the latest economic clues.
One focus will be whether the data will show that the pound’s recent weakness is helping support Britain's economy, said Masashi Murata, currency strategist for Brown Brothers Harriman in Tokyo.
“But regardless of how the GDP data turns out, there may not be any major impact on the pound in the near-term,” Murata said.
The market's focus is on comments from UK policymakers, to gauge their stance towards Britain’s renegotiation of its relationship with the European Union, as well as any comments from BoE officials, Murata added.
BoE rate cut hopes
Fading expectations for a rate cut by the BoE next week have lent support to the pound, which recovered from Tuesday’s trough after Bank of England Governor Mark Carney had said on Tuesday that the central bank could not ignore the pound's “fairly substantial” recent drop.
The euro eased 0.1 per cent to $1.0900, but held above a 7-1/2 month low of $1.0851 struck on Tuesday.
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