The yen bounced back from a one-week low against the dollar on Thursday, with investors taking their cues from recently volatile Japanese equities, though activity was thin as investors wound down trading ahead of the Easter holidays. The dollar bought 102.01 yen, down 0.2 percent on the day and moving back toward last Friday's 3-1/2-week low of 101.32 yen.
It rose as high as 102.37 yen in the previous session after the Nikkei stock average rallied on comments from Japanese Finance Minister Taro Aso that the market took to suggest more stock buying by the government's pension fund. The Nikkei was slightly higher in afternoon trade on Thursday. The euro edged down about 0.1 percent against its Japanese counterpart to 141.14 yen, after hitting a two-week high of 141.77 yen on Wednesday.
"Instead of being driven by fundamentals, the yen and the stock market are moving in relationship to each other this week, as investors adjust their positions ahead of the Easter holiday," said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank. While markets in Tokyo will remain open, some countries around the world would will be closed on Friday ahead of Easter Sunday, and others will remain closed on Monday. This means trading liquidity is likely to be low, market participants said.
Some investors apparently used Bank of Japan Governor Haruhiko Kuroda's comments as an excuse to buy back the yen, even though his remarks contained nothing new, Sera said. The central bank chief said nothing to indicate that more easing steps would be forthcoming anytime soon. Kuroda said the BOJ will adjust monetary policy when needed, and repeated that Japan was making steady progress toward achieving its 2 percent inflation target as the economy continues to recover moderately.
Wednesday's US focus was on Janet Yellen's second public speech as Federal Reserve Chair, in which she stressed the need for accommodative policy citing persistently low inflation and economic slack. Her dovish remarks somewhat offset promising data that showed the US economy was regaining momentum. US industrial production rose at a faster-than-expected clip in March, while the Fed's Beige Book report showed economic activity picked up in recent weeks. That left the dollar little changed against a basket of major currencies in US trade. The dollar index last traded at 79.689, slightly lower on the day.
Analysts at BNP Paribas said they remained positive on the dollar's outlook. "With US data surprise measures bouncing now, the Fed nearly half way through its tapering process, and US yields still near the bottom of their broad ranges, we see upside risks for the USD from current levels," they wrote in a note to clients. The euro edged up against the greenback in Asian trade even after data on Wednesday confirmed that euro zone inflation had slowed to levels not seen since November 2009. That should keep the pressure on the European Central Bank to act if prices do not rebound. The euro was last at $1.3838, up about 0.2 percent, though still solidly below a 3-1/2-week peak of $1.3906 touched last Friday.