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FOREX-Dollar struggles vs yen, sterling up on Carney's remarks
September 27, 2013 / 8:09 AM / 4 years ago

FOREX-Dollar struggles vs yen, sterling up on Carney's remarks

* BOE’s Carney quoted as saying no case for QE at moment

* Yen up after Japan finmin remarks on corporate tax rate

* Fed taper uncertainty, budget cliff-hanger weigh on USD

By Anirban Nag

LONDON, Sept 27 (Reuters) - The dollar fell on Friday, trading near a 7-1/2 month low against the safe-haven Swiss franc, because of wrangling over the U.S. budget and a lack of clarity over when the Federal Reserve will begin to scale back stimulus.

The dollar also fell against the yen, after Japanese Finance Minister Taro Aso said he was not thinking of lowering the effective corporate tax rate right now. That surprised some investors who had positioned for a weaker yen on expectations of more fiscal stimulus to prop up the economy.

Sterling rose to $1.6133 against the dollar after Bank of England Governor Mark Carney was quoted as saying he saw no need for more bond-buying by the central bank given signs of recovery in the British economy.

All of which pushed the dollar index down 0.1 percent to 80.433, not far from a recent seven-month low of 80.060 struck after the U.S. Federal Reserve decided last week to maintain its bond buying programme at $85-billion a month.

“There have been local issues like Japan not going for a corporate tax and sterling rising on Carney’s comments which are all driving the dollar lower. The fiscal impasse is also an element which is playing on the dollar,” said Daragh Maher, strategist at HSBC.

The dollar was down 0.1 percent against the Swiss franc at 0.9093 francs not far from a trough of 0.90775 struck on Wednesday, its lowest since early February. The euro also fell to a three-month low against the franc but was flat on the day against the dollar at $1.3495 with most awaiting European Central Bank Mario Draghi’s speech later. I

Maher said the dollar would take direction from U.S. data and if numbers showed a recovery, the greenback could gain once the political battle in Washington over fiscal issues was over.

U.S. House of Representatives Republicans on Thursday refused to give in to President Barack Obama’s demand for straightforward bills to run the government beyond Sept. 30 and to increase borrowing authority to avoid a default.

CLOUDY FED OUTLOOK

Beyond the budget impasse, investors are focused on Fed meetings in October and December, with some expecting the central bank to hold fire until early 2014 to make sure the U.S. recovery is firmly entrenched.

Against the yen, the dollar fell 0.4 percent to 98.65 yen . The yen edged higher after Aso’s comments.

His comments came after a Kyodo news agency report on Thursday that the Japanese government planned to say it would “urgently consider” cutting the corporate tax rate when it compiled a stimulus package next week.

The issue of whether Japan will lower the effective corporate tax rate has been weighing down the yen, which has slid this year on the back of Japanese Prime Minister Shinzo Abe’s push to reflate the economy through steps such as aggressive monetary stimulus and pro-growth structural reforms.

“The government will likely implement some form of fiscal stimulus but clearly it won’t include a corporate tax rate cut immediately,” said Derek Halpenny, European head of global market research at Bank of Tokyo Mitsubishi.

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