The yen extended a steep decline on Wednesday, hitting a 2-1/2 year low against the Australian dollar and an 11-month trough against the euro, threatening a breach of long-term support levels that could pave the way for further losses.
The Japanese currency also hit a six-month low against the US dollar, with traders citing yen-selling by macro hedge funds and Japanese importers. The yen and other currencies with very low interest rates such as the Swiss franc have slid over the past couple of weeks as market volatility declined, stirring talk about the revival of carry trades, a tactic of selling low-yielding currencies to fund investment in currencies with higher interest rates.
The yen's decline brought it close to a series of support levels against the dollar clustered roughly between 85.65 yen to 86.00 yen, suggesting that the dollar will slow its ascent against the yen in the near term. The Australian dollar surged 0.7 percent to 88.27 yen, having earlier climbed to a high of 88.68 yen, its highest since September 2008, with 90 yen seen as the next possible target.
The euro hit an 11-month peak of 121.91 yen on trading platform EBS. It last stood at 121.66 yen, up 0.8 percent, with stop-loss buying having added to its rise. The euro rose to a five-month high of $1.4282. A rise beyond its November peak of $1.4283 would take the euro to its highest since January 2010.
The dollar rose 0.5 percent to 85.30 yen. The dollar scaled a six-month peak of 85.53 yen, having surged 12 percent from its post-World War Two record low of 76.25 yen hit in March, days after Japan's north-east was devastated by a massive earthquake and tsunami.
The euro is also right near some longer term resistance levels. On weekly Ichimoku charts, a form of Japanese technical analysis that is widely used among market players, the top of the cloud comes in right around 122 yen while the 100-week moving average lies near 121.76 yen.