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FOREX-Dollar hits 2-week high vs yen on U.S.-Japan summit relief

Published 13/02/2017, 03:02 pm
© Reuters.  FOREX-Dollar hits 2-week high vs yen on U.S.-Japan summit relief
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* Dollar/yen hits 2-week high, euro/dollar near 3-1/2-week low

* Relief as currencies were not high on U.S.-Japan summit agenda

* Dollar resumes rise on tax reform hopes

* Kiwi edges back after being hit by RBNZ last week, Aussie steady (Updates prices, adds details and quotes)

By Shinichi Saoshiro

TOKYO, Feb 13 (Reuters) - The dollar rose to a two-week high versus the yen on Monday, with the market breathing a sigh of relief as the closely watched two-day U.S.-Japan summit held over the weekend was seen to have ended smoothly.

U.S. President Donald Trump and Japanese Prime Minister Shinzo Abe appeared to have established a quick friendship through a hug, a prolonged handshake and rounds of golf, allaying investor fears of the meeting ending acrimoniously with Trump talking tough on trade, currency and security issues. dollar index against a basket of major currencies was up 0.15 percent at 100.930 .DXY , close to a near two-week high of 101.010 reached on Friday when pledges of "phenomenal" tax reforms by Trump had boosted the greenback.

The dollar was up 0.65 percent at 113.920 yen JPY= , briefly touching 114.170, the highest since Jan. 30.

"There is relief that the summit ended without confrontation, and that the joint statement did not directly touch upon currency issues," said Masafumi Yamamoto, chief forex strategist at Mizuho Securities.

There was concern prior to the summit that Trump would reiterate accusations that Japan was one of several countries devaluing their currencies to the disadvantage of the United States.

"While the outcome of the U.S.-Japan summit itself is not a huge dollar boosting factor, the currency continues to receive firm support from expectations towards Trump's 'phenomenal' tax plans," Yamamoto said.

Trump said his administration would be announcing "something phenomenal in terms of tax" over "the next two or three weeks" during a meeting with airline executives on Thursday.

The president's comments increased risk appetite, sending Wall Street shares to record highs on Friday, in turn lifting U.S. Treasury yields from multi-week lows to the dollar's advantage.

The market's near-term focus was on Federal Reserve Chair Janet Yellen's congressional testimony scheduled for Tuesday and Wednesday. Investors are keen to gauge Yellen's policy stance after the central bank upgraded its inflation views earlier this month.

"Trump has just taken a positive approach to tax reforms and infrastructure spending. It remains to be seen if this has any impact on Yellen, as the Trump administration's lack of policy clarity seemed like a factor that made the Fed hesitant to raise rates," said Koji Fukaya, president at FPG Securities.

U.S. indicators being awaited for their potential market impact included the January producer price index (PPI) on Tuesday, the January consumer price index (CPI) and retail sales on Wednesday and housing-related data on Thursday.

The euro was down 0.2 percent at $1.0621 EUR= , dipping close to Friday's 3-1/2-week low of $1.0608.

The common currency fell 1.3 percent last week, its biggest weekly loss in three months, as political risks rose on the back of election concerns in countries such as France and Germany. Resurfacing Greek debt woes further hurt confidence towards the euro zone.

Elsewhere, the New Zealand dollar inched up 0.1 percent to $0.7203 NZD=D4 . It continued to edge away from a 2-1/2-week low of $0.7172 struck Thursday after the Reserve Bank of New Zealand (RBNZ) signalled that it would keep interest rates at record lows for two years.

"The RBNZ has clearly knocked the New Zealand dollar lower. However, we still find it difficult to get overly bearish given a still solid economic picture," wrote Philip Borkin, senior economist at ANZ.

The Australian dollar was little changed at $0.7671 AUD=D4 after surging 0.7 percent on Friday on upbeat Chinese trade data and an optimistic economic view given by the Reserve Bank of Australia. A rise above $0.7696 would take the Aussie to a three-month high. (Editing by Richard Pullin and Jacqueline Wong)

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