FOREX-Yen falls to 2-1/2-year low after Japan official's comment

Thu Jan 24, 2013 4:57pm EST

Related Topics

* Japanese official says yen decline not over
    * Dollar jumps 2 percent vs yen in best day in 15 months
    * German data boosts hopes euro zone economy stabilizing

    By Wanfeng Zhou
    NEW YORK, Jan 24 (Reuters) - The yen tumbled 2 percent
against the dollar to hit a 2-1/2-year low on Thursday after a
Japanese economic official said the government has no problem
with the dollar hitting 100 yen.
    The yen has lost more than 10 percent of its value since
November, weakening to about 90.50 per dollar from 80, on
expectations that the new prime minister, Shinzo Abe, will force
the central bank to ease monetary policy to combat deflation.
    But the yen's decline stalled earlier this week after the
Bank of Japan said its open-ended commitment to buy assets would
kick in only next year, disappointing investors who had expected
far more aggressive easing measures.
    "That disappointment only opened the door for bargain
hunters who are now driving yen crosses up again due to the fact
that Abenomics is still in play, and it will likely continue,"
said Neal Gilbert, market strategist at GFT in Grand Rapids,
Michigan.
    "Prime Minister Shinzo Abe and his cabinet members are now
aiming for 100.00 on the dollar/yen, and we can expect more
verbal, political and monetary rhetoric until that goal is
reached," Gilbert added.
    The dollar rose 2 percent to 90.36 yen, a day after
hitting a one-week low of 88.03 yen. At current prices, it is
the biggest one-day percentage gain since Oct. 31, 2011. The
dollar had risen as high as 90.54 yen on Reuters data, the
strongest since June 2010. Gains accelerated after the pair
broke above resistance at 90.25, the high on Monday.
    Traders cited reports quoting Japan's deputy economy
minister, Yasutoshi Nishimura, as saying the yen's decline is
not over and a dollar/yen level of 100 would not be a concern.
Nishimura was also quoted saying that only if the dollar rises
to 110-120 yen would it add to domestic import costs. 
    "At some stage, the ability of this jaw-boning and verbal
intervention to drive the yen lower will become subject to
diminishing returns, but that does not appear to be the case
yet," said Bob Lynch, chief currency strategist at HSBC in New
York. 
    A record trade deficit for Japan and comments by Abe that he
expected the Bank of Japan to achieve its 2 percent inflation
goal as soon as possible added to selling pressure.
 
    Strong readings on the U.S. economy showing the number of
new claims for jobless benefits dropped to a five-year low last
week lifted U.S. bond yields, which also helped the dollar
against the yen. 
    The euro rallied 2.5 percent to 120.91 yen, having
risen to 121.06 yen on Reuters data, a 21-month high. Traders
cited Asian central banks as major buyers of the euro as they
stepped up yen selling. 
    Against the dollar, the euro rose 0.5 percent to $1.3377
, not far from the 11-month high of $1.3403 hit on Jan.
14, which is acting as near-term resistance. Support was cited
at $1.3250, near lows touched on Jan. 11. 
    Private sector activity data highlighted the diverging
fortunes of the bloc's biggest economies. Weak performance in
France was offset by numbers out of Germany showing that its
private sector expanded at the fastest rate in a year.
 
    "The better PMI reading suggests a euro zone economy that is
starting to stabilize," said Aroop Chatterjee, currency
strategist at Barclays Capital in New York. "It's not out of the
woods yet, but the economic and financial conditions are
certainly better now than last year."
    Traders said macro funds and asset managers were buying the
euro, and if data continued to show prospects for the region
were improving, the currency could rise further.
    Some analysts said the announcement on the size of next
week's first repayments of cheap three-year loans taken by banks
from the European Central Bank just over a year ago could give
the euro a bit of a lift.
    Banks took more than 1 trillion euros in the long-term
refinancing operation loans from the ECB. A Reuters poll showed
traders expected about 100 billion to be paid back next week.
 
    Option traders reported strong demand for euro calls - bets
that the euro will rise - for expiry on Friday.
FILED UNDER:
A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

Find your dream retirement town

Florida? Hawaii? Reuters has teamed up with Zillow to give you the power to customize a list of your best places to retire.  Video | Full Article