The dollar edged down against the yen in quiet trade Thursday as investors turned attention to the pace of further Federal Reserve interest rate increases and the health of the US economy.
Trading volumes were thin ahead of the New Year holiday and Japanese financial markets were closed for a holiday.
Analysts said that traders have already priced in the decision on 16 December by the US central bank to increase interest rates for the first time in nearly a decade.
The Fed raised its benchmark federal funds rate, locked near zero since the 2008 financial crisis, by 25 basis points to 0.25-0.50%, kicking off what is expected to be a series of increases policymakers said would be gradual and follow the pace of the economy.
Higher borrowing rates usually boost the dollar as they encourage investors to shift attention to the United States searching for better and safer returns.
“I see the market’s focus turning to the pace of the rate hikes dictating dollar,” said IG Markets Market Strategist Bernard Aw, in Singapore.
“For now, there is a difference of two hikes between what the Fed projects, and what the market is pricing in. At some point next year, this gap will narrow and how it will converge should influence the dollar,” he told AFP.
“For now, I think the dollar is finding it tough to go higher, which suggests that much of the December rate hike has been priced in.”
At around 0430 GMT, the dollar was trading at Japanese yen 120.38 down from 120.52 in late New York trade on Wednesday.
The euro was at $1.0931 from $1.0932 and 131.58 yen from 131.75 yen.
The greenback was down against the Australian, New Zealand, Singapore and Taiwan dollars, and eased versus the Philippine pesos.
But it edged up against the South Korean won, Indonesian rupiah, Indian rupee, and Malaysian ringgit.