The yen hovered near a 15-year high against the dollar on Thursday as conflicting messages from policymakers led investors to bet Japanese authorities were not ready to intervene to weaken their currency. The euro fell against the dollar and yen as concerns about the health of the European banking sector and sovereign debt issues persisted.
Japanese Finance Minister Yoshihiko Noda said his ministry was conducting simulations on forex intervention. But his comments were somewhat undermined after Bank of Japan Governor Masaaki Shirakawa said he did not discuss currencies and monetary policy at a government meeting.
Analysts expect the yen to stay firm in the coming months as uncertainties about the outlook for the United States and global economies prompt investors to seek safety. The market still thinks Japan is unlikely to intervene until the dollar falls near 80 yen. "We saw the continued differences in opinion between the Ministry of Finance and the Bank of Japan," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.
In late trading in New York, the dollar was down 0.1 percent at 83.82 yen. It earlier hit a session low of 83.49, according to electronic trading platform EBS, within sight of the 15-year low of 83.34 yen hit on EBS on Wednesday. Nomura bank expects the dollar to fall to 82.5 yen by the end of the year and weaken to 80 yen by March 2011.
Options traders said there was good demand for yen calls in the 1- to 2-month bracket, but yen puts were more popular in shorter dates, suggesting investors are hedging their bets about possible intervention. The euro was down 0.2 percent at $1.2701 after failing to convincingly break resistance at $1.2760. Against the yen, the euro fell 0.1 percent to 106.54 after hitting a session low of 105.98 yen, moving closer to a nine-year low of 105.41 yen hit in late August.
The euro's weakness came despite a slight increase in risk appetite, which got a boost after better-than-expected US jobless data and trade activity raised hopes the economic recovery would accelerate. The Australian dollar extended gains as a barrier was taken out at $0.9250. It hit a four-month high on strong jobs data and rising speculation of a rate rise. The Aussie dollar last traded up 0.6 percent at 0.9241.
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