Dollar shaky as central banks team with peers

0.1% dip in US currency to yen after expected Tokyo election result

The dollar edged off from a nine- month low against a basket of currencies on Monday, but it remained shaky as signs indicated that central banks in Europe were moving away from accommodative monetary policies, keeping the euro and sterling well supported.

The dollar index against a group of six major currencies was 0.1 percent higher at 95.729, crawling off a ninemonth trough of 95.470 which plumbed on Friday.

The greenback was hit hard last week as hawkish comments from central bankers increased expectations that the European Central Bank, the Bank of England ( BoE) and the Bank of Canada ( BOC) would eventually shift to tighter monetary policy.

The dollar added 0.1 percent to 112.435 yen after briefly falling to 111.900 earlier, before climbing back quickly.

The dip was evident after a knee- jerk reaction to the his- torical defeat of Japanese Prime Minister Shinzo Abe’s Liberal Democratic Party ( LDP) in a landmark election in Tokyo on Sunday, which signals potential struggles ahead for the premier.

“The Tokyo election won’t have a strong market impact, in my view, as there are no opposition parties in Japan that can immediately replace the [ ruling] LDP,” said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

“The currency market is more focused on monetary policy changes in Europe and other regions,” Ishizuki said, noting “the BoE and BOC now appear to be in a hurry to normalize monetary policy, which was a big surprise last week.”

The Bank of Japan ( BOJ), still deeply committed to monetary easing, was seen being left behind with its Group of Eight counterparts, which are seemingly already on the path toward monetary tightening.

“It would be inevitable for the BOJ to be seen as the odd one out, still sticking to its largescale easing and providing strategic incentive for speculators,” said Koji Fukaya, president at FPG Securities, in Tokyo.

“An environment is being set up in which the yen depreciates while others gain.”

The euro fell 0.1 percent to $ 1.1413 after reaching a near 14- month high of $ 1.1445 on Friday.