The yen fell broadly on Wednesday, hitting 10-month lows against the euro and touching its lowest level in nearly three weeks versus the dollar as interest rate differentials widened in favour of US and European currencies. The dollar rose 0.6 percent on the day to a three-week peak of 83.02, having breached its 50-day moving average of 82.10. The next resistance level is seen at 83.30, the March 11 high.
The greenback is now above an 82.00 yen high marked on March 18, when Japanese authorities and other G7 central banks worked in concert to stop runaway yen gains. This level will now act as support. A Japanese brokerage trader said there is a possibility Japanese investors could reduce their hedges if they turn negative on the yen's medium-term outlook, a factor that could push the dollar towards 90-100 yen.
The dollar is up nearly 9 percent against the yen since hitting a record low of 76.25 yen on March 17. The euro rose to 116.95 yen after breaking through major resistance around 115.50/60, a level that has capped the pair since May 2010. The single currency has been driven by expectations that the ECB, worried about inflation, may raise rates in April. Wednesday's data is expected to show euro zone inflation above the ECB's target of "close to but below" 2 percent.
Three-month euro interbank lending rates rose as high as 1.219 percent, the highest since June 2009. The euro was down a quarter percent at $1.4078 while the dollar index rose 0.1 percent against a basket of major currencies, although it stayed well off last week's 15-month lows of 75.340. Elsewhere, the Australian dollar rose to a fresh 29-year peak of $1.0334. It hit highs not seen since early 1982, when it was a managed currency.
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