Yen hits multi-week highs

The yen hit multi-week highs against major currencies while the risk-sensitive Australian dollar floundered to a three-month low against the US dollar on Wednesday as worries about global growth rose. A jump in Spanish bond yields exacerbated concerns about the fragility of peripheral eurozone economies in a market already hurt by last week's disappointing US job report and soft reading on Chinese imports.
Coupled with a big fall on Wall Street, which could induce more repatriation by Japanese investors, the yen climbed across the board, hitting a five-week high against the US dollar before expectations of fresh easing by the Bank of Japan pushed it back a bit. The dollar fell to 80.60 yen but crept back to around 80.85 yen, having managed to hold above an important support from the weekly Ichimoku cloud top at 80.66.
A sustainable break below the cloud top could accelerate dollar selling given that the dollar's sustainable break above the cloud top in February - its first in five years - made many market players bullish on the dollar versus yen. But for now, the dollar is supported by long-held speculation that the BoJ is likely to increase its asset purchase as soon as its policy meeting on April 27.
Sources told Reuters the Bank of Japan will consider easing monetary policy at that meeting. The dollar was also supported by talk of strong bids at 80.50/55. The euro fell to a seven-week trough of 105.44 yen, while the Aussie plumbed 82.52, reaching levels not seen since early February. Support is seen at 82.33, the 38.2 percent retracement of its October to March rally.
"Simple momentum suggests that AUD/JPY should head for its 38.2 percent retracement of its rise since October 2011, which is almost exactly its 100-day moving average," said Sebastien Galy, strategist at Societe Generale. Not helping sentiment, the International Monetary Fund warned commodity-exporting countries should prepare for lower prices given weaker global economic activity and lower demand.
Against the dollar, the Aussie skidded to $1.0226, its lowest since January, before regaining a bit of ground to $1.0290, holding above support at around $1.0236, the 76.4 percent retracement of the late-December to late-February rally. The euro also lost ground against the US currency, slipping to $1.3099 from Tuesday's high of $1.3145. As a result, the dollar index pushed up to 79.861 from a one-week low of 79.603. Unsettling the single currency, Spanish bond yields rose to within a whisker of 6 percent and German bund yields equalled their lowest-ever levels as investors opted for the safety of German debt.