The yen soared to a record high against the dollar on Wednesday as concerns escalated over a nuclear crisis in Japan, and investors nervously watched to see if Japanese authorities will step in to stem the currency's rise. The dollar fell more than 4 percent against the yen to as low as 76.25 yen on trading platform EBS, breaching the previous record low of 79.75 set on April 19, 1995.
"Apart from intervention, there isn't much to stop this slide and the dollar doesn't look like it's coming back soon," said Brian Dolan, chief strategist at Forex.com in Bedminster, New Jersey. Japan's nuclear crisis may have taken its most dangerous turn yet after a US official said one of the pools containing highly radioactive spent fuel rods at the stricken plant had run dry.
Some traders said Japanese investors locked into hybrid derivatives might be forced to sell the dollar/yen as the price falls further below 79.74, according to IFR Markets analysts. Douglas Borthwick, managing director at Faros Trading, said intervention is imminent and could be co-ordinated with other central banks. He said in addition to the dollar, the Korean won and the Chinese yuan have fallen against the yen to levels that in the past have triggered action from Japan. The yen has seen steady buying since last week's earthquake, as Japanese and international investors closed long positions in higher-yielding, riskier assets such as the Australian dollar, funded by cheap borrowing in the Japanese currency.
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