The dollar recovered slightly on Monday from its biggest weekly fall in more than seven years against the yen, while losing ground against a euro helped by solid set of manufacturing numbers from Germany.
Worries over Japanese policymakers’ inability to stem the yen’s rise prodded the dollar to a new low of 106.14 yen JPY= in the first hours of Asian trade, before a recovery to 106.64, 0.2 percent down on the day.
Finance Minister Taro Aso was quoted in Japanese media over the weekend as viewing the yen’s strength as “extremely concerning”. But after the Bank of Japan did not deliver following reports it would launch new stimulus last week, traders and analysts said the bias for the yen continued to be upward.
“It’s curious that we’re now seeing verbal intervention again,” said Thu Lan Nguyen, a strategist with Commerzbank in Frankfurt. “One can only imagine that they did not want a stronger yen but the authorities there caused it by taking no action last week.”
She said she saw “quite a lot of risk” of the Japanese currency heading toward 100 yen per dollar.
Japan and its currency are still global investors’ safe haven of choice at times of financial stress and the yen’s rise is some measure of the scale of concern over global growth and finances.
Last week’s nearly 5 percent gain for the yen was its biggest since the 2008 crisis and pushed “long” bets on more gains to the highest on record. [IMM/FX]
Others say those bets will take a beating in the months ahead if the BOJ’s lack of action last week was just the calm before another round of money-printing to get Japanese investment and inflation moving.
“Dollar-yen looks like a lemming hurling itself off a cliff, and the yen bulls may end up feeling a bit like lemmings in due course,” Societe Generale strategist Kit Juckes wrote in a note to clients. “Recession, capital outflows and long speculative positions, yet still the yen rallies toward USD/JPY 100.”
Purchasing manager surveys on Monday offered more food for thought on the struggle for the growth that would allow interest rates to rise and a number of major emerging and developing economies to dig themselves out of debt.
China’s numbers were softer than forecast, showing factory activity expanding but only marginally in April. German figures, while marginally below forecast, showed engineering orders improving and manufacturing overall expanding solidly.
The latter were enough to push German and French stock markets higher, with London closed for a holiday, helping the euro to a 6-1/2 month high of $1.1493.
An Australian central bank meeting will be at the center of attention on Tuesday, when London markets reopen. The Aussie dollar rose a half percent to $0.7636 on Monday, adding to an 11 percent surge since hitting multi-year lows in January.
The index of the U.S. dollar’s broad strength against a basket of major currencies dipped 0.2 percent to 92.893. .DXY