The yen fell back towards its post-intervention lows on Monday, with speculators wary of pushing it higher against the dollar in case of more co-ordinated selling of the Japanese currency by the Group of Seven nations. Traders said the first joint G7 intervention since 2000 on Friday was working for the moment, as it had helped to restore order to a volatile market.
"Dollar/yen will be supported in the near term with the market wary of more intervention," said Hans Redeker, chief fx strategist at BNP Paribas. The dollar rose 0.8 percent from late US trade on Friday to 81.27 yen, helped by demand from model-generated trading accounts, with traders citing a cluster of offers at 81.30/50 and 82.00, with good demand around 80.50.
The euro was 0.8 percent higher at 115.11 yen, while the common currency was flat on the dollar at $1.4164, having hit a four-month high of $1.42. At one point on Friday, the dollar had surged nearly 4 percent on the day to 82.00 yen as G7 central banks undertook concerted yen selling after the currency jumped to a post-World War Two record of 76.25 yen to the dollar the previous day.
There has also been market speculation that Japanese insurers may repatriate funds from abroad to pay policyholders after the devastating earthquake and tsunami on March 11, although they are thought unlikely to sell a large amount of foreign assets.
Intervention has succeeded in bringing down implied volatility on dollar/yen, with one-month trading back down at around 12.4 percent, well off the highs of about 21 percent on Thursday. The yen dipped broadly and the Australian dollar rose over 1 percent to 81.80 yen, with risk sentiment improving despite the air strikes in Libya by Western powers. The Aussie also rose 1 percent versus the dollar to $1.0071, helped by the rise in global stocks
Analysts said positive risk appetite, expectations that Japanese money market rates will remain low and the Bank of Japan putting a cap on the yen's rise meant conditions were supportive for at least some yen-funded carry trades. One factor supporting the Japanese currency is that no one seems to favour the dollar at the moment. The dollar fell to a 15-month low against a basket of major currencies of 75.536 earlier on Monday, hampered by the Federal Reserve's monetary easing policy. The euro briefly hit a four-month high of $1.4200 against the dollar as the eurozone looked set to officially agree bolstering its bailout fund at a March 24-25 EU summit.
Comments
Comments are closed for this article.