Dollar rallies versus Yen

Reuters: The dollar rose against the yen for the first time in five trading sessions on Monday, as stock markets rallied on expectations the Federal Reserve’s policy announcement this week will reassure investors that monetary stimulus will remain in place.

The U.S. currency extended its gains after data showed growth in New York state’s manufacturing sector picked up in June, while sentiment among U.S. homebuilders surged to the highest in seven years. Speculation the Fed will start winding down its stimulus program has led to a selloff in global equities, helping the yen post its best weekly gain in nearly four years against the dollar last week. The yen has exhibited a close inverse relationship with equities, especially Japanese shares.

Investors are hoping that Fed Chairman Ben Bernanke will reassure markets that the central bank’s policy will stay accommodative.

 Such comments could revive investor appetite for riskier assets and pressure the low-yielding yen, analysts said. But they added that fading hopes of tapering by the Fed could see the dollar struggle to make meaningful gains.

The dollar rose 0.9 percent to 94.91 yen, helped by gains in Japan’s Nikkei share average <.N225>. U.S. and European stocks also climbed. It had earlier hit a session low of 94.08 yen, not far from a two-month low of 93.78 yen set on Thursday. Support is seen around 93.57, the 38.2 percent retracement of its September-May rally.