The yen gave up some ground on Wednesday as the Australian dollar pushed to a fresh 18-month high, while the euro began to lose its footing again as Greek debt worries kept it under pressure. The yen fell to its lowest since September 2008 on the Aussie, nearing a key Fibonacci level at 87.70 yen, while dollar buying down near 93.50 yen saw the Japanese currency reverse early gains and fall against the greenback.
Traders said foreign and Japanese players had picked up dollar/yen and yen crosses, with one dealer reporting US dollar buying by a large Japanese bank, but the greenback had retreated from its high of the day as the Asian session neared its end. The dollar has recovered about 11 percent of its value since hitting a 14-year low of 84.82 yen last November and has broken up through some significant chart resistance levels.
The dollar rose 0.3 percent to 94.05 yen, with talk of options barriers around 95.00 yen. It has not traded above 95 yen since August but rising short-term dollar rates and Treasury yields have boosted it as US data has signalled economic improvement. Expectations that the Federal Reserve will easily beat the Bank of Japan to the punch on raising interest rates have also supported it. The Bank of Japan said after a policy meeting that the economy was continuing to pick up, but analysts say prolonged deflation is likely to keep the government pressing it for even more monetary easing.
The Aussie topped 87.50 yen, after breaching its 200-week moving average at 87.06 yen, but pulled back later after nearing resistance at 87.70, which is a 61.8 percent retracement of its fall in 2007 from above 107.80 to 55.11 in late 2008. The Aussie held close to an 11-week high of $0.9288 set on Tuesday, supported by expectations of more rate hikes after the Reserve Bank of Australia on Tuesday raised its cash rate to 4.25 percent and flagged more hikes in coming months.
The dollar index rose 0.2 percent to 81.533, while the euro fell 0.3 percent to $1.3365, with support expected at its March low of $1.3267. Traders said sentiment towards the single currency was bearish with many macro funds selling the euro at every uptick, although buying interest was expected at $1.3350.
It has come under renewed pressure this week after media reported Greece wanted to renegotiate a joint EU-International Monetary Fund aid deal reached last month. Greece denied the report but on Tuesday the yield spread between 10-year Greek and German government bonds at one point exceeded 4 percentage points, the widest since the euro's launch.
The euro was flat at 125.75 yen, having lost over 1.2 percent on Tuesday. The Canadian dollar held at C$0.9995 per US dollar, after striking parity the day before for the first time since mid-2008 as rising commodity prices boosted prospects of higher Canadian rates.
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