Yen Advances past 100 Against the Dollar for Second Time this Week
The yen strengthened beyond 100 per dollar for a second time this week as the U.S. currency’s bid to break out from a three-month low stalled after Federal Reserve minutes indicated officials were divided over the urgency to raise interest rates.
A gauge of the dollar has fallen more than 5 per cent this year as investors bet the Fed will raise interest rates at most once this year, compared with policy makers’ forecasts at the start of 2016 for four increases.
That means the U.S. central bank is less likely to diverge from the Bank of Japan and European Central Bank, which are boosting stimulus to spur flagging growth.
“There’s increasing doubt the Fed rate hike in December may even happen. In that scenario, a much weaker U.S. dollar will see quite a noticeable strength in the Japanese yen. There’s a view there in the market that there’s little the Japanese government or the Bank of Japan can do about it in such a scenario,” said Angus Nicholson, a market analyst at IG Ltd. in Melbourne.
Currency rising for five straight days
The yen appreciated 0,4 per cent to 99.93 per dollar as of 07.20am on Thursday (August 18) in London after advancing to 99.54 on Tuesday (August 16); the strongest since June 24. The currency has risen for five straight days, heading for the longest winning streak since June.
Japanese authorities are closely watching for speculative moves in the exchange rate as it has been volatile, Vice Finance Minister Masatsugu Asakawa said on Thursday (August 18). Strategists at Bank of Tokyo-Mitsubishi UFJ Ltd. and Morgan Stanley predict the yen will extend this year’s 20 per cent gain versus the dollar.
“The BOJ is running short of tools which will have a big market impact. Yen intervention may be one tool left in the bag for authorities,” said Janu Chan, a senior economist at St. George Bank Ltd. in Sydney.
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