NEW YORK: The yen rallied yesterday, snapping a three-day decline against the dollar as it neared 100 to the US currency, while expectations for modest growth in corporate earnings capped stocks and overshadowed a fall in Chinese inflation.
The Japanese currency weakened to 99.66 to the dollar, using Reuters data, the dollar’s strongest level against the yen since May 2009, before the sell-off in the yen stalled.
Analysts believe it is only a matter of time before the dollar sails past the 100 yen mark.
“Given the breadth of yen bearishness, any reprieve would likely encourage investors to re-establish short yen positions at more favorable exchange rates,” said Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, D C.
Tuesday’s dollar selling left the greenback down 0.5 percent at 98.92 yen.
The U S currency has still gained around seven percent against the yen since the Bank of Japan unveiled a massive stimulus program last Thursday involving large purchases of long-term Japanese government bonds.
The BOJ’s bold measures have had a major impact on the world’s main debt markets, sending Japanese government yields down sharply and spurring a search for higher-yielding assets, which has caused yields to fall on U S and euro zone bonds.
“Markets are increasingly focused on the notion that larger JGB purchases, at longer maturities, by the BOJ could push Japanese domestic long-term investors elsewhere,” said Vassili Serebriakov, strategist at BNP Paribas in London.
Reuters
