Forex Market Update: Yen Gains against Dollar and Euro
Friday, February 8, 2013 9:19 AM
The Japanese yen rose sharply against the U.S. dollar and the euro on Friday following comments from Japan’s finance minister. The dollar also slipped against the euro after gaining nearly 1% in the previous trading session.
The yen has fallen sharply in recent weeks amid speculation that the Bank of Japan (BOJ) will implement further monetary easing measures to boost economic growth and fight deflation. The BOJ has already announced an aggressive bond buying program and raised its inflation target to 2% even as the Japanese Prime Minister Shinzo Abe called on the central bank to do more.
There has been growing speculation that Abe will appoint a more dovish BOJ Governor when the current chief of the central bank steps down. However, according to Reuters, Abe is facing opposition from within his own cabinet and financial bureaucrats over the appointment of new BOJ Governor.
Meanwhile, Japan’s Finance Minister, Tar Aso said that the Japanese currency’s drop was steeper than intended.
Aso’s comments has lifted the yen and created doubts over whether the new BOJ chief will implement additional easing measures.
Speaking to Reuters, Geoffrey Yu, Currency Strategist at UBS, said that the market is responding to the Reuters report and comments from Aso, and taking profit in short yen positions. Yu, however, believes that the dollar remains a buy on dips against the yen. He said that speculation about who will take charge at the BOJ will continue until there is an appointment.
The euro dropped 1.5% to 123.54 yen in early trading on Friday before recovering. At last check, the single currency was down 1.1% to 124.02 yen. The dollar, meanwhile, fell more than 1% to 92.17 yen in early trading on Friday before recovering to trade at 92.49 yen.
The dollar also slipped against the euro after gaining 0.9% in the previous trading session. The greenback fell as traders remained cautious ahead of the U.S. trade data. At last check, the euro was up 0.1% to $1.3419.