Dollar starts week on the defensive, risk aversion lifts yen

dollar

NEW YORK: The dollar began the week on the back foot on Monday as a bout of risk aversion underpinned the yen, though the US currency garnered some support on renewed talk of a possible rate hike by the Federal Reserve as early as this month.

The perceived safe-haven yen benefited from a drop in global equities. The dollar was down 0.2 percent at 102.50 yen, while the euro slipped 0.1 percent to 115.21 yen.

Against the dollar, the common currency edged up 0.1 percent to $1.1238.

A spate of Fed speakers kept hopes alive for a September rate hike, despite some recently disappointing economic data including only a modest rise in U.S. nonfarm payrolls.

After Boston Federal Reserve President Eric Rosengrenspoke on Friday, odds on a rate hike in September rose to 30percent probability from 24 percent before his comments.

Monday is the final day on which US policymakers can speak in public before the “blackout period” begins a week before the Sep. 20-21 meeting. Fed governor Lael Brainard was suddenly scheduled late last week to give a talk in Chicago on Monday.

“Market participants are wondering if maybe she’s being wheeled out to give the market one last warning of a rate hike at next week’s meeting,” Marshall Gittler, head of investment research at FXPrimus, said in a note.

“The thinking is that if someone as dovish as she is starts talking like a hawk, people will notice,” Gittler said.

Speculators increased their bets on the US dollar for the first time in six weeks in the week ended Sept. 6, according to Reuters calculations and data from the Commodity Futures Trading Commission released on Friday.

Japanese yen net long positions fell to their lowest level since mid-August.

The Bank of Japan, which will also meet the same week as the Fed, is now studying several options to steepen the bond yield curve, say sources familiar with its thinking, as authorities desperately seek out policy tools to revive an economy that has failed to emerge from stagnation despite years of massive stimulus.

Geopolitical fears also added to investors’ risk aversion.

South Korea’s Yonhap News Agency reported on Monday that North Korea has completed preparations for another nuclear test, citing South Korean government sources who said the North may use a previously unused tunnel at its mountainous test site.

Also raising long-term concerns, news that Democratic presidential candidate Hillary Clinton was diagnosed with pneumonia and fell ill at a Sept. 11 memorial underscored concerns about her health less than two months before the general election.