LONDON (AFX) - The dollar firmed against the yen in early trade following overnight comments by Standard & Poors that Japan's debt ratings may have to be cut if reforms are delayed, dealers said.
"Further (reform) delays in implementing structural reforms could adversely affect the ratings," S&P said. The comments weighed on the yen as well as the Nikkei, which closed 189 points lower..
The yen has this month been the second best performing currency against the dollar behind the Brazilian real, noted Commerzbank currency strategist Kamal Sharma. .
This could change over the coming weeks in the run-up to Japan's fiscal half year end on Sept 30, he said. "In the run up to Sept 30 book closing, the (Japanese) Ministry of Finance will be keen to see dollar/yen as high as possible," he said. "Our analysis shows that in the 15 trading days leading up to the fiscal half year end, the yen has been lower on Sept 30 every year since 1996.".
The release of US trade figures tomorrow presents near term risks to the dollar, said Sharma. WestLB currency strategist Michael Klawitter thinks the dollar is likely to remain under some pressure at the beginning of the week, partly on the back of the trade figures. And in contrast to last week, Klawitter thinks the dollar may also get less support from US equities given that a lasting recovery in US stocks remains unlikely as long as the risk of a double dip recession remains high. Neil Mackinnon, chief economist at ECU Group, doubts that tomorrow's trade figures will have too much of an impact. "US trade figures tomorrow are unlikely to give the dollar much of a respite," he said. "The increasing trade gap is a medium-term negative for dollar and increasing funding pressures." Meanwhile, the euro remains firm against the dollar, despite the deteriorating economic and fiscal situation in the euro zone, said WestLB's Klawitter. The key focus on the economic front, he said, will be German second quarter GDP on Thursday. London 8.23 am Tokyo 2.00 pm Dollar yen 118.14 up from 117.83 sfr 1.4892 up from 1.4860 Euro usd 0.9853 down from 0.9858 yen 116.40 up from 116.15 stg 0.6396 up from 0.6392 sfr 1.4670 up from 1.4649 Sterling usd 1.5407 down from 1.5423 yen 181.94 up from 181.73 sfr 2.2941 up from 2.2919 Australian dollar usd 0.5433 down from 0.5453 stg 0.3525 down from 0.3536 yen 64.19 down from 64.25