SINGAPORE (Reuters) - The dollar hit a six-week low against the yen on Wednesday, dented by uncertainty over when the Federal Reserve will start reducing its monetary stimulus.
The dollar came under pressure as a break of 97.50 yen sparked stop-loss selling of the greenback, and the dollar later fell to 97.09 yen on trading platform EBS, its lowest level against the yen since late June.
The greenback later pared some of its losses and last stood at about 97.35 yen, down 0.4 percent from late U.S. trade on Tuesday.
One possible support level for the dollar sits near 96.72 yen, the 61.8 percent retracement of the greenback’s rally from mid-June to early July.
Dollar bulls are looking to buy the greenback on dips, but seem wary of doing so at this juncture, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.
“I don’t think people can aggressively take long dollar positions now because market sentiment is poor. What everyone is probably thinking is that they want to buy (dollars against the yen) at some point, but now is not the time,” Okagawa said.
Uncertainty about when the U.S. Federal Reserve would begin rolling back its stimulus has kept dollar bulls at bay in recent days.
Below-forecast U.S. jobs data last Friday had prompted investors to push back expectations that the Fed would begin slowing its bond-buying stimulus of $85 billion per month as early as September. The Fed’s asset-purchase program is seen as negative for the dollar as it is tantamount to printing money.
A trader for a Japanese bank in Singapore said there was talk of dollar buying by Japanese importers on Wednesday.
On the other hand, the trader said there is speculation about potential for fund repatriation by Japanese investors related to U.S. bond redemptions due this month, a factor that could dent the dollar against the yen.
The euro eased 0.1 percent to $1.3298. The euro had edged higher on Tuesday, helped by news of a surge in factory output in Germany, but still remains below a six-week high of $1.3345 set on July 31.
Sterling faces a major test later on Wednesday when Bank of England Governor Mark Carney is expected to offer forward guidance on how long policy will stay super-easy.
“We see risks that the tone of Carney’s press conference is more dovish than expected,” said analysts at JPMorgan in a note.
“Beyond any knee-jerk rally, the upshot may well be a more extended period of glorified range-trading for the pound - growth is too strong for the currency to weaken, while the Bank could well be too resolute and effective in anchoring forward rates expectations for it to appreciate.”
Sterling last stood at $1.5326, down 0.2 percent from late U.S. trade on Tuesday.
Additional reporting by Wayne Cole in Sydney; Editing by Simon Cameron-Moore