FOREX-US dollar, euro jump vs yen as G20 OK with Japan easing

Fri Apr 19, 2013 10:18am EDT

Related Topics

* US dollar looks likely to re-test 100 yen mark

* Japan finance minister says G20 not opposed to BOJ stimulus

* Euro gains after ECB's Weidmann said rates in Europe appropriate

By Wanfeng Zhou

NEW YORK, April 19 (Reuters) - The U.S. dollar and euro rallied more than 1.0 percent versus the yen on Friday after Japan said the Group of 20 countries did not oppose its aggressive monetary easing aimed at beating deflation rather than weakening the currency.

The euro rose to a session high against the dollar after European Central Bank board member Jens Weidmann said interest rates in Europe are appropriate.

Traders said hedge funds resumed buying the dollar against the yen, leaving the pair poised to test strong resistance and option barriers at the 100 yen level in the coming days. The dollar hit a four-year high of 99.94 yen last week.

Analysts and traders said activity in the currency market is low as many market participants are focused on television screens as events unfold in Boston. A lack of economic events and the ongoing G20 meeting in Washington also impacted volume.

Finance Minister Taro Aso said "Japan explained that its monetary policy is aimed at achieving price stability and economic recovery, and therefore is in line with the G20 agreement in February."

Earlier this week, a senior International Monetary Fund official said Japan's easing is a welcome step in reviving the economy. Bank of Canada Governor Mark Carney said Japan's action is consistent with the G20 communique that called for countries to refrain from competitive devaluation.

"Over the last week we have heard support for the BoJ aggressive policy from several fronts," said Camilla Sutton, chief currency strategist at Scotia Capital in Toronto.

"Together this suggests that even with dollar/yen at 100, there is unlikely to be a global backlash; this in turn opens up the opportunity for dollar/yen to test higher still."

The dollar rose 1.1 percent to hit 99.21 yen, having hit a session peak of 99.35 yen, according to Reuters data. Offers were reported around 99.50 yen, however, which may stem its rise in the very short term.

Sutton said further upside target lies at 105.25 yen, the 50 percent retracement of the dollar/yen's fall from around 135 in January 2012 to around 75 in October 2011.

The euro rose 1.6 percent to 130.12 yen. It reached a session peak of 130.23 yen and looked on course to test last week's three-year high of 131.10 yen.

Against the dollar, the Euro rose 0.5 percent to $1.3111, having hit a session high of $1.3128.

Weidmann said interest rates in Europe are appropriate given current conditions. But if data shows change, the ECB needs to reassess rates again.

The euro lost 1.1 percent on Wednesday, its worst daily performance since June, after Weidmann was quoted by the Wall Street Journal as saying the bank could ease further if economic data warrants it.

"Weidmann clarified that comments in the WSJ were not meant to signal a trend change on ECB rates," said analysts at Action Economics.

Earlier, the euro also got a brief boost after German Finance Minister Wolfgang Schaeuble said the ECB should try to limit the amount of liquidity in the euro zone, although he also acknowledged the "precarious" economic plight of some countries in the region.

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