FOREX-U.S. dollar, euro soar vs yen as G20 skirts Japan critique

Fri Apr 19, 2013 4:12pm EDT

Related Topics

* U.S. dollar looks likely to re-test 100 yen mark
    * Japan officials says G20 not opposed to BoJ stimulus
    * Euro gains after ECB's Weidmann said rates in Europe
appropriate
    * Boston lockdown, bomb suspect search has minor impact on
trading


    By Wanfeng Zhou and Daniel Bases
    NEW YORK, April 19 (Reuters) - The U.S. dollar and euro
rallied 1.5 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 at weakening its
currency.
    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.
    Japan's 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." 
    Newly installed Bank of Japan Governor Haruhiko Kuroda said
the monetary policy stance gained broad understanding but some
emerging market nations said Tokyo must be mindful of the
negative impact its flood of cash can have on investment flows
into their higher-growth economies.
    Earlier this week, a senior International Monetary Fund
official said Japan's easing via a $1.4 trillion BOJ monetary
stimulus plan is a welcome step in reviving the economy.
    Outgoing 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. Carney, the
head of the G20's Financial Stability Board, takes over the Bank
of England in July.
    "It appears with Kuroda's and Aso's comments and the G20's
acceptance of their explanation on monetary policy that the path
is clear for the BOJ to both continue easing or enact additional
easing measures if needed. This is leading to the late day
sell-off in the yen," said Brian Daingerfield, currency
strategist, at RBS Securities in Stamford, Connecticut.
    A lockdown and city-wide search for a suspect in the Boston
Marathon bombing after another suspect was killed may have
contributed to reduced trading volume, analysts and traders
said. The lack of economic data releases on Friday and the
ongoing meetings of global policymakers in Washington also hurt
volume.
    Brad Bechtel, managing director at foreign exchange
brokerage Faros Trading in Stamford, Connecticut, said his firm
saw less liquidity than normal for a Friday morning.
    "We have a big asset manager account in Boston and they are
generally big players in the FX space. But today they're unable
to do their jobs. That is keeping liquidity down," he said. "A
lot of folks in Boston are out of the market and anyone not in
Boston is stuck watching the TV trying to find out what's going
on there."
    School holidays in Boston could also be contributing to
lower activity from Boston-based accounts, asset managers said. 
    The dollar rose 1.4 percent to 99.50 yen, having hit
a one-week peak of 99.68 yen, according to Reuters data.
    "Many might have expected the G20 to bring up criticism of
the BOJ for running monetary stimulus. This has not been the
case. Market participants see that as a green light for the yen
to go lower," said Tatjana Michel, currency strategist at
Charles Schwab in San Francisco.
    "We definitely see the yen lower in the next couple of
months due to this massive stimulus. I see the dollar going to
110 yen by the end of the year," she said.
    The euro rose 1.4 percent to 129.90 yen. It
reached a session peak of 130.24 yen and looked on course to
test last week's three-year high of 131.11 yen.
    The euro gave up most of its early gains, trading
just above break-even on the day at $1.3057, having risen to a
session high of $1.3128 after European Central Bank board member
Jens Weidmann said interest rates in Europe are appropriate. But
if data shows change, the ECB needs to reassess rates, he said.
 
    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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