The dollar briefly touched its latest low for the year against the euro on Friday after the market took aim at options barriers, while sterling, a laggard in the broad rally against the dollar, rose ahead of UK growth data. The yen fell across the board as an accumulation of domestic factors, such as expectations of rising government debt and revision of a privatisation scheme, provided investors with a reason to close long positions and resume yen sales.
The Japanese currency, whose low domestic interest rates often make it a popular funding currency, fell to its lowest in a year against the Australian dollar, a two-month low against the euro and one-month lows against sterling and the struggling dollar.
Traders said the factors denting the yen were not new but speculative accounts were growing doubtful about it due to a number of political and economic issues, including a cabinet decision this week to revise a postal privatisation scheme once symbolic of pro-market reforms.
The yen gained in September and earlier this month after falling, particularly against higher yielders, earlier in the year. The higher-yielding Australian dollar rose 0.6 percent to 85.00 yen after hitting a one-year high of 85.12 yen. The euro rose 0.4 percent to 137.75, touching its highest in two months at 137.83 yen, and the dollar also gained 0.4 percent to 91.61 yen, with resistance expected at 91.75 yen and then around 92.30.
Sterling climbed 0.5 percent on the day to 152.46 yen, after touching a one-month high of 152.65 yen. The pound also hit its highest in a month against the dollar, extending a steep rebound from a five-month low earlier in October as short-term speculators have covered short positions. The pound rose 0.2 percent on the day to $1.6645, after climbing as high as $1.6679.
With that view intact, talk of options triggers up at $1.5050 on euro/dollar encouraged dollar selling, although the fall was not substantial and the euro quickly ran into sales after hitting a 14-month high at $1.5061. The euro crossed a psychological barrier at $1.5000 this week and traders said the next set of options triggers were thought to lie around $1.5050, which were duly tested and the level broken.
The euro later eased on the day to $1.5005 but a trader for a Japanese trust bank said the market was already eyeing $1.5100 as the next target, although he said the euro's rise might be gradual. The dollar also dipped briefly to a 15-month low at 1.0033 Swiss francs but was holding just above a 14-month low against a basket of six major currencies set this week at 74.94. It edged up 0.2 percent on the day to 75.235, although some in the market are not ruling out an eventual fall to a March 2008 low around 70.7.