The yen found little reprieve on Wednesday and hit a 10-week low against the dollar, as risk appetite stayed buoyant and investors continued to bet on more stimulus from China. The dollar bought 103.84 yen, after hitting a peak of 103.935 yen as improving appetite for risk sent US stocks to a record closing high and fuelled a 1.4 percent surge in Tokyo's Nikkei.
The euro hovered near a three-week high of 143.46 yen. "The combination of rising global equity markets with rising US Treasury yields is a catalyst for USD/JPY to move higher," said Kit Juckes, a London-based analyst at Societe Generale. Near-term focus is on the US ADP National Employment Report due later in the session, with its impact on equity markets of particular interest to investors.
"About the only factor that could thwart the dollar's advance in the short term is a decline by the equity markets. Weaker-than-expected US economic data would cool the equity rally and give the yen a breather," said Junichi Ishikawa, a market analyst at IG in Tokyo. "However, the global equity rally has legs thanks to receding concerns over Ukraine and China's economic slowdown. Any dip by the dollar on data disappointment could be short lived," he said.
Meanwhile, the euro drifted up to $1.3804, continuing to recover from a one-month low of $1.3704 set on Friday. Euro bulls are betting the European Central Bank will stand pat on policy at its review on Thursday even as the threat of deflation has mounted. Data on Tuesday was encouraging with German unemployment falling for a fourth month, while a business survey showed an across-the-board rise in factory output that suggested a more entrenched recovery for the euro zone.
By contrast, a recent string of disappointing Chinese data has investors speculating on more action from Beijing. Just this week, two surveys highlighted persistent weakness in China's manufacturing sector. Such stimulus hopes have in part helped support demand for commodity currencies. The Australian dollar hit a four-month high of $0.9310 on Tuesday and last traded at $0.9241. The Aussie briefly matched a 10-month peak of 95.97 yen set on Tuesday. The New Zealand dollar consolidated at $0.8639 after reaching a 2-1/2-year high of $0.8702 on Tuesday. The kiwi fetched 89.42 yen, having scaled a 6-1/2-year high of 89.91 yen on Tuesday.