The U.S. dollar fell to the upper 104 yen range Wednesday in Tokyo as traders sought to cash in on its rise to an eight-month high in the lower 105 yen on speculation that the U.S. Federal Reserve may raise its key interest rate sooner than previously anticipated.
At 5 p.m., the dollar fetched 104.95-97 yen compared with 105.05-15 yen in New York and 104.83-85 yen in Tokyo at 5 p.m. Tuesday. It moved between 104.87 and 105.31 yen during the day, changing hands most frequently at 105.20 yen.
The euro was quoted at $1.3126-3128 and 137.76-80 yen against $1.3128-3138 and 137.95-138.05 yen in New York and $1.3126-3127 and 137.60-64 yen in Tokyo late Tuesday afternoon.
The dollar rose to 105.31 yen, the highest since Jan. 2 when it hit 105.44 yen, after a report released overnight showed the U.S. manufacturing sector grew at its fastest pace in nearly three and a half years in August.
“The strong data fed expectations about Friday’s employment report and was seen as supporting the case for a faster rate hike from the Fed,” said Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow.
The U.S. currency erased some of those gains later in the day after Yasuhisa Shiozaki was appointed welfare minister in Japanese Prime Minister Shinzo Abe’s Cabinet shakeup.
The yen had fallen against the dollar a day earlier when reports emerged of the reform-minded Shiozaki’s likely appointment to the post, giving him oversight over the country’s giant pension fund — thus power to shift money from investment in domestic bonds to riskier assets like Japanese stocks and foreign bonds.