The yen on Tuesday pulled away from a 9-month low plumbed the day before on month-end buying by Tokyo exporters, although short-covering by hedge funds forced it to relinquish some early gains, traders said. A record trade deficit, shrinking current account surplus and surprise policy easing by the Bank of Japan have combined to trigger what is set to be - despite an apparent correction kicking in - the yen's sharpest monthly drop in more than two years.
While traders think the weak yen trend would continue, for now the dollar was down 0.2 percent at 80.44 yen, slipping from the peak of 81.66 yen hit the day before. It briefly fell as low as 80.01 yen, but managed to bounce back, supported by dollar-buying by Japanese investors unwinding their currency hedges. "A pretty natural dip after the February spike is setting in and is amplified by Japanese exporters," said Sumino Kamei, senior analyst at Bank of Tokyo-Mitsubishi UFJ in Tokyo.
The dollar rally stalled a little above a strong technical resistance at 81.62 yen, marked by the 61.8 percent retracement of the slide from its 2011 high to that year's low. "The pullback is rather moderate right now and if we manage to stick above 80 yen for the rest of the day, we could see some more yen easing in the coming weeks," Bank of Tokyo-Mitsubishi UFJ's Kamei said.
Chart supports for the dollar are seen near 80.10 yen area, including Monday's low of 80.13 and tenkan line on the daily Ichimoku charts at 80.01. Short-covering by leveraged accounts and yen selling by Japanese importers pushed the euro up to 108.18 yen, 0.2 pct higher compared to late New York levels, but it was still well off the four-month peak of 109.95 yen hit on Monday.
Support for the pair is seen at 107.75 yen, its 200-day moving average. Daily close below the level would be a bearish sign for the single currency. The euro stood at $1.3441 versus $1.3397 late in New York, having retreated from a near three-month peak at $1.3487 set on Friday. Immediate support for the common currency is seen in the $1.3357-66 area around recent lows, with $1.3291 marking the 38.2 percent retracement of the February 16-24 rise. The Australian dollar rose 0.3 percent to $1.0780, from Monday's low around $1.0650, rising in line with most Asian bourses, but remained tethered to the recent range of $1.0600-1.0845.