The yen hit a seven-month low against the dollar on Wednesday and looked set to stay under pressure after recent monetary easing in Japan, while the euro struggled against the greenback as markets assessed implications of Greece's bailout deal. The dollar hit a peak of 80.37 yen, its highest level since mid-July, with traders citing buying by Japanese importers and offshore players. This took it beyond highs hit in October and August after Japanese authorities took steps to curb yen gains.
The yen has been on the defensive since the Bank of Japan's surprise move to boost its asset buying programme last week. Some analysts said the move could mark the end of the yen's long-term uptrend that prompted Japan to intervene in the currency market three times last year. Comments from a Japanese Ministry of Finance official that there was still a risk of the yen rising, and that Japan would continue to monitor currency moves carefully and would respond as needed, added to broad yen weakness.
"The initial rebound in our view is a position adjustment following the BoJ's announcement of their shift in policy," said Ian Stannard, head of European FX strategy at Morgan Stanley. The dollar faced resistance around 80.38 yen, the July 12 high, with traders reporting demand to sell around that level and ahead of an options barrier at 80.50 yen. Morgan Stanley recommended selling the dollar at 80.40, targeting 77.75, but with a tight stop loss order at 80.65 yen.
The dollar has risen roughly 5 percent against the yen so far in February, putting it on track for its biggest monthly percentage gain since March 2010. In addition to the BoJ's monetary easing, the yen has come under pressure after data showed that Japan's current account surplus - a major and constant support for the yen - fell to a 15-year low last year.
The euro rose to a three-month peak against the Japanese currency of 106.33 yen, its highest since mid-November, and was last up 0.55 percent at 106.13 yen. But it retreated from near two-week highs against the dollar hit the previous day as optimism over the long-awaited Greek bailout deal reached early on Tuesday gave way to concerns about economic growth and implementation risks. The euro was steady at $1.3241, below Tuesday's high of $1.3293, its highest level since February 9. It faced resistance at $1.3306, the 100-day moving average. Since late January the euro has traded in a range roughly between $1.30 and $1.33.