The dollar slipped from near a two-month high against the yen

Forex outlook:

The dollar slipped from near a two-month high against the yen on Wednesday as technical problems hampered some currency trading and on a media report that the Bank of Japan will probably discuss bumping up interest rates at next month's policy meeting. At 07:00 GMT the dollar trade around 118.60 against the yen, around 1.3160 against the euro.

Telecommunications around Asia were severely disrupted after earthquakes off Taiwan damaged undersea cables, hindering financial transactions. "Probably there was a little bit of a swerve ball thrown in because of the system problems," said Luke Waddington, head of forex trade at Royal Bank of Scotland in Tokyo. The dollar had crept up to a fresh two-month high against the low-yielding yen on Tuesday after lackluster Japanese consumption and spending data kept doubts simmering about whether the BOJ would raise rates in January.

The yen also got a boost from dollar selling by Japanese exporters after the U.S. currency came close but failed to stake out a fresh two-month high. "Exporters wanted to take advantage of levels, and some natural flows are triggering this (dollar fall)," said Waddington at Royal Bank of Scotland.

Gold: Gold prices gained some luster on Wednesday, as profit takers stepped back ahead of the return of European trading following the Christmas break. A weaker U.S. dollar against the Japanese yen encouraged early selling, which was evident in trading at the Tokyo Commodity Exchange but evaporated in later activity. "Gold is under some pressure due to selling from Tocom but overall the market has not moved much," a Tokyo-based trader said. "Basically we saw some long liquidation on the weaker yen ahead of the Christmas holiday but it seems that might have finished now," the trader said.

Crude oil: U.S. crude oil futures ended more than a dollar lower on Tuesday, dropping 2.1 percent and relinquishing early strength as mild Northeast weather and light post-holiday trading offset geopolitical concerns. Crude prices fell last Thursday and Friday, following Wednesday's $64.15 high trade, the loftiest since crude reached $64.46 on Sept. 19. "The weather still dominates the demand picture," said Steve Bellino, senior vice president for energy risk management at Fimat USA. U.S. heating demand is expected to be about 23 percent below normal this week as mild weather continued to blanket the major cities of the Midwest and Northeast, the National Weather Service said.

 
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