The dollar was slightly lower against the yen and the euro in rangebound Asian trade on Wednesday, with investors largely avoiding to take strong positions ahead of Thursday’s U.K. referendum.
The U.S. dollar USDJPY, -0.34% was changing hands at ¥104.50, compared with ¥104.77 late Tuesday in New York. The euro EURUSD, +0.2579% traded at $1.1255, rising slightly from $1.1242 late Tuesday.
The WSJ Dollar Index BUXX, -0.24% a measure of the dollar against a basket of major currencies, was down 0.15% at 85.63.
The currency market recently has moved in tandem with polls around the U.K.’s referendum on whether to stay in the European Union. After fears about a victory for a ‘leave’ vote, recent U.K. polls have suggested the ‘remain’ camp is gaining ground, causing unwinding of buying the yen which is sought at times of geopolitical uncertainty.
“At first, investors sold and sold (the dollar against the yen), then short covering was kicking in this week,” said Marito Ueda, director at FX Prime byGMO. “But it seems they’ve found they bought a bit too much,” referring to the dollar’s brief gain to ¥105.06 overnight.
Speculative investors seem to have unloaded their positions “to make them easier to make moves on either side,” soon after the outcome of the referendum as early as Friday morning during Tokyo time, said Ueda.
"The biggest issue in the market is clearly the upcoming vote in the UK. The sentiment swings back and forth and right now it is swinging toward 'remain' and that is giving support," said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.
While economists say a British exit from the EU - or Brexit, as it is known - would be painful mainly for the country itself and to a lesser extent for rest of the Europe, the consequences for the global economy are harder to estimate.
Oil climbed in Asia Wednesday after Federal Reserve boss Janet Yellen's cautious remarks on the US economy weakened the dollar and traders nervously await Britain's vote on its future in the European Union.
Traders are also waiting for the release later in the day of official US stockpiles data, hoping for an idea about demand in the world's top oil consumer, after an industry group said supplies had tumbled last week.
Reference: MarketWatch, Reuters, Daily Times, Business Recorder
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