By Masayuki Kitano
TOKYO, May 19 (Reuters) - The dollar inched higher against
the yen on Monday, making up for some losses late last week when
a plunge in U.S. consumer confidence stirred concerns about the
outlook for the U.S economy.
The dollar fell on Friday after the Reuters/University of
Michigan index of consumer confidence highlighted the threat to
economic growth, dropping to the lowest level since June 1980.
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The Australian dollar climbed to a 24-year peak around
$0.9570 <AUD=D4> on Monday in the wake of the U.S. data. The
Aussie later trimmed gains, falling 0.2 percent on the day to
$0.9538.
Despite the weak reading on U.S. consumer confidence, market
players' views on the dollar remained mixed.
There was no compelling reason to push the dollar below last
week's one-month low near 102.60 yen, said Tokichi Ito, deputy
general manager for the forex team at Trust & Custody Services
Bank.
"The focus is on what kind of factors might push the dollar
out of its recent ranges against the yen and when," Ito said.
"At this point, few people have a clear view on whether the
dollar will break above its range or fall below it," he said,
adding that on balance, pessimistic views on the U.S. economy
have receded in recent weeks.
The dollar rose 0.1 percent from late U.S. trading on Friday
to 104.12 yen <JPY=>.
Since early May, the dollar has traded between about 102.60
yen and 105.70 yen, having pulled up from a 13-year low of 95.77
yen hit on electronic trading platform EBS in mid-March.
The euro was steady from late in New York at $1.5575 <EUR=>.
DATA, FED MINUTES
The Bank of Japan is widely expected to keep interest rates
at 0.50 percent at a two-day policy meeting that ends on Tuesday.
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Traders were focusing on U.S. and euro zone data due later in
the week, including a reading on U.S. producer prices and the
German ZEW institute's economic sentiment index due on Tuesday.
The Ifo economic institute's index of German business sentiment
due on Wednesday is another focal point.
The surprisingly steep fall in U.S. consumer confidence
slightly tempered market expectations for the Federal Reserve to
raise rates later in the year. <FEDWATCH>
U.S. short-term interest rate futures show a roughly 80 to 85
percent chance of the Fed raising rates by 0.25 percentage point
to 2.25 percent by the end of the year. They had been fully
pricing in such an increase before the consumer confidence data.
Friday's U.S. data also showed that consumers' short-term
inflation expectations hit a 26-year high, and eclipsed the
impact of a report showing increases in construction starts for
new U.S. homes and new building permits.
Masaki Fukui, senior market economist at Mizuho Corporate
Bank, said market players were also awaiting the minutes of the
Fed's policy meeting in April, due on Wednesday, to see what Fed
officials thought about the outlook for inflation and the
economy.
"Given growing expectations for a Fed rate hike, I don't know
how much support the dollar may gain further even if the minutes
show a cautious view on inflation," he said.
Investors began leaning in early May toward the possibility
of a Fed rate hike, after data showed a smaller-than-expected
decline in U.S. payrolls in April, and such expectations have
since grown.
"But the dollar is expected to hold steady," Fukui added.
(Additional reporting by Tetsushi Kajimoto, Editing by Brent
Kininmont)
