FOREX-Yen steady versus dollar, but downtrend seen intact

Wed Jan 23, 2013 4:39pm EST

Related Topics

* Yen weakness to resume on stimulus speculation
    * Options market shows demand for 100 dollar/yen targets
    * IMF lowers 2013 global growth forecasts, cites euro zone

    By Wanfeng Zhou
    NEW YORK, Jan 23 (Reuters) - The yen was little changed
against the dollar on Wednesday one day after a sharp rally, and
traders appeared ready to resume selling the yen on expectations
of more monetary stimulus in Japan.
    The dollar has risen about 10 percent against the yen since
mid-November. The yen staged a forceful recovery on Tuesday
after the Bank of Japan disappointed investors who had hoped for
aggressive easing actions.
    Analysts said the yen's outlook remains bleak. The BoJ will
remain under pressure to inject more stimulus into the economy,
which will hurt the currency. Charts and positioning in the
options market also pointed to medium-term yen weakness, with
some betting on a move to 100 yen per dollar. 
    Paresh Upadhyaya, director of currency at Pioneer
Investments in Boston, said a rise in the dollar in the second
half of the year could add momentum to the yen weakness.
    "The U.S. economy is performing better than expected," said
Upadhyaya. "U.S. yields will start to head higher and interest
rates differential will move against the yen."
    The dollar was flat at 88.68 yen, retreating from a
2-1/2-year high of 90.25 yen set on Monday, according to Reuters
data. It had declined 1 percent versus the yen on Tuesday. 
    The Canadian dollar tumbled after the Bank of Canada held
its benchmark interest rate at 1 percent but pushed back the
timing of any further interest rate increases. The U.S. dollar
jumped 0.8 percent to C$0.9989.
    "BOC has effectively pushed out their tightening date by at
least six months," said Alan Ruskin, head of G10 FX strategy at
Deutsche Bank in New York.
    Sterling recovered from a near five-month low against the
dollar after better-than-expected UK jobs data and minutes
released from the Bank of England's last policy meeting cast
doubt on the need for more monetary easing. The pound was last
little changed at $1.5844.
    The euro was also little changed against the dollar, at
$1.3317, with traders citing technical factors and after
the International Monetary Fund trimmed its 2013 forecast for
global growth, partly due to the unexpectedly stubborn euro zone
recession. 
    "There's a little bit of a reality check that's taking place
in the market," Upadhyaya said. "That might be leading to a
temporary pause in this risk rally."
    
    BEARISH ON YEN
    The euro fell 0.1 percent against the yen to 118.11 yen
.
    The Bank of Japan said on Tuesday its open-ended commitment
to buy assets would kick in only next year, disappointing those
who had expected a faster, more aggressive move.
    Analysts said a change in BoJ leadership in April is also
expected to weigh on the yen, with the market expecting Prime
Minister Shinzo Abe to appoint a governor favoring more
aggressive monetary easing.
    "There was obviously disappointment about the BoJ's
measures. However, I don't see the moves the last three days as
a reversal of the bullish trend in dollar/yen," said Vassili
Serebriakov, currency strategist at BNP Paribas in New York.
    "We are still seeing a lot of interest in buying the
currency pair, and we still expect further upside," he added.
    Commerzbank in a note to clients said the dollar/yen has
recently failed at 90.25 four times, suggesting "the near term
risk is for a slightly deeper retracement ahead of the next leg
higher." The bank said its target remains 93.32.
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