FOREX-Yen weakens as Japan signals no change to yen policy

Mon Feb 18, 2013 4:46am EST

Related Topics

* PM Abe says buying foreign bonds an option for Japan
    * Japan earlier skirted G20 criticism over weak yen
    * Markets await announcement on next Bank of Japan governor
    * Euro near 3-week low vs dollar, dollar index at 6-week
high

    By Anooja Debnath
    LONDON, Feb 18 (Reuters) - The yen dipped near a 33-month
low against the dollar on Monday after Japan's prime minister
signalled no change to the country's ultra-loose monetary
policy, which its G20 peers earlier refrained from criticising.
    Shinzo Abe, poised to nominate a new Bank of Japan governor,
said buying foreign bonds could be among options for the central
bank, whose policies were among factors driving the exchange
rate. 
    Abe's comments came after the G20 nations meeting on Friday
and Saturday did not single out Tokyo as manipulating currencies
to gain a competitive edge.  
    The dollar rose 0.6 percent to 94.01 yen, recovering
from the low of 92.20 touched on Friday and within reach of a
33-month peak around 94.47 set a week ago, though profit-taking
by speculators prevented it from testing that level. Option
barriers at 94.50 yen acted as near-term resistance. 
    Analysts said the yen's downtrend was intact. 
    The euro was up 0.2 percent at 125.32 yen,
roughly midway between Friday's two-week low of 122.90 and a
34-month high of 127.71 yen hit earlier this month.
    "The G20 has not clarified much at all and the yen will
continue to weaken on pressure from the government on the Bank
of Japan to be more accommodative," said Jane Foley, senior
currency strategist at Rabobank.
    Foley said she expected the dollar to rise towards 95 yen in
the coming weeks. But the pace of its gains would be more
gradual because it had already risen a long way in a short time
and it could see some consolidation in the near term.
    Data showed speculators marginally trimmed strong bets on
the yen weakening in the week ended Feb. 12. 
    Citi have added a new long dollar/yen spot position to their
leveraged trade ideas portfolio and are targeting 95.70 yen with
a stop loss at 92.55 yen. "We intend this trade to have a
holding period under two weeks and then re-evaluate," they said
in a note to clients.
    The market's focus is now on Abe's choice for BOJ governor,
expected in coming days. Sources told Reuters that former top
financial bureaucrat Toshiro Muto, said likely to be less
radical than other candidates, is the front-runner.
 
    
    EURO VULNERABLE
    Although it gained against the yen, the euro stayed near
three-week lows against the dollar, remaining vulnerable after
last week's data revealed a deeper-than-expected recession in
the euro zone and before potentially destabilising elections in
Italy.
    The euro fell 0.2 percent to $1.3335, staying above
chart support around $1.3310, the 38.2 percent retracement level
of its Nov-Feb rally. 
    The dollar rose to a 6-week high against a basket of
currencies, with its index hitting 80.727.     
    The euro, which could encounter more selling pressure ahead
of the Feb 24-25 Italian election, has fallen about 2.5 percent
since peaking at a 15-month high of $1.3711 on Feb 1 as worries
grow about the health of the euro zone economy.
    "The (weak euro zone GDP) data has made a rate cut by the
European Central Bank more realistic. The euro will come under
pressure from its weak economic fundamentals," said Daisuke Uno,
chief strategist at Sumitomo Mitsui Bank.
    Markets will focus on flash euro zone Purchasing Managers'
Index data for February later in the week for further
indications of how the euro zone economy is faring.
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