Yen hits 7-1/2 month low in Asia

The yen dropped to 7-1/2 month low against the dollar on Friday, pressured by selling by Japanese importers, but market players said it was likely to find support as US Treasury yields are to set to remain capped. The greenback has rallied 5 percent against the yen in February, helped by easing steps from the Bank of Japan, Japan's shrinking current account surplus and a surge in its LNG imports as nearly all of the nation's reactors have gone offline following the Fukushima nuclear crisis.
The dollar gained 0.7 percent to 80.56 yen, continuing to pull away from this year's low of 76.03 yen plumbed on February 1. Short-term players triggered weak stop loss orders above Wednesday's peak of 80.41, helping the dollar break above a major chart resistance point of 80.42 yen, which is the 50 percent retracement of its fall from the 2011 high to that year's low.
But analysts doubt that the rapid pace of gains in the greenback can last. "Dollar/yen moves have closely reflected moves by yields on US Treasuries, but since the rate differentials are not that high and the yields remain fairly low, I would expect the pair to consolidate around current levels," said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong.
The euro jumped 0.7 percent to 107.76 yen, powering to its highest level since early November and more than 10 yen off this year's low of 97.04 yen hit on January 16. The euro also hit a fresh 2-1/2-month high against the dollar, holding on to hefty gains made a day earlier after improved German business sentiment prompted traders to cover their short positions.
The single currency rallied 1 percent the previous day, spiking well above the Ichimoku cloud on daily charts, and breaching its 90-day moving average after having failed to do so decisively in three attempts this week. "After it broke above some key levels, it looks like the euro's rally still has legs, but I think the momentum will fade as we go into the next week," Credit Agricole's Kotecha.
"The euro will probably stumble ahead of 1.35," he said, pointing to a December 9 high of $1.3460 as the next potential resistance. Chartists also pointed to resistance at $1.3436, the 50 percent retracement of its October-January slide. The euro hit a session high of $1.3385 and was last trading around $1.3372, barely changed from late New York levels.
Data from Munich-based Ifo think-tank raised hopes that the German economy is improving and will avoid recession despite the problems facing other euro zone countries. "Technicals suggest that the euro may gain more in the coming days, but looking at the largely unresolved problems in Europe, would anyone seriously want to go long euro?" said Teppei Ino, a currency analyst at Bank of Mitsubishi Tokyo UFJ.
The Australian dollar rose to $1.0723, marking a gain of 0.1 percent on the day, after the Reserve Bank of Australia Governor Glenn Stevens said monetary policy is broadly neutral, stoking speculation the central bank may hold off from cutting interest rates in the coming months. The Aussie gained more than 1 percent on Thursday in an aggressive rebound from a three-week low just under $1.06.