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Tokyo - The dollar neared a 15-year low against the yen on Thursday as traders bet that Japanese authorities are not yet ready to intervene, while the Australian dollar hit a four-month high on solid Australian jobs data.
The rise in the Aussie failed to give its usual fillip to the US dollar against the yen, via trade in the yen crosses, reinforcing bearish views on dollar/yen.
Traders said there had been speculation that Japanese intervention might be imminent after talk swirled in the market late on Wednesday that Japanese authorities had checked rates, prompting short-term players to go long on the dollar.
But wariness about intervention is tapering off as nothing has happened up to now, and those who bought the dollar might be unwinding their positions, traders said.
Japanese Finance Minister Yoshihiko Noda said on Thursday the ministry was conducting simulations on forex intervention, in a possible reference to rate checks, but the yen hardly budged as the perception remains that Japan is unlikely to intervene until the dollar falls near ¥80.
The dollar slipped 0.3% on the day to ¥83.60, closing in on a 15-year low of ¥83.34 struck on trading platform EBS on Wednesday.
Will they, won't they?
Wariness about intervention lifted the dollar briefly in early trade but it failed to sustain a rise above ¥84, its five-day moving average.
"The US dollar really seems under pressure. There's fear of a 'Japanisation' of the US economy, where growth would stagnate and interest rates fall," said Koichi Yoshikawa, head of FX trading at BNP Paribas.
Shrinking yield gaps between Japan and the US have been a major driver behind the dollar's fall versus the yen since May, as the prospect of continuing low US interest rates has extended and investors wary of risk have moved into bonds.
Japanese investors bought a net ¥731bn of foreign bonds last week, the 17th week in a row of net overseas bond buying. Traders are watching for signs of fund repatriation into yen ahead of half-year book-closing on September 30.
Some market players are now looking to the Japanese ruling party's leadership vote next Tuesday, with Prime Minister Naoto Kan holding only a slim lead over rival Ichiro Ozawa, seen by markets as likely to pursue more reflationist policies.
If Ozawa wins the vote and becomes prime minister, some players say there is likely to be a knee-jerk fall in the yen.
The greenback seems to have support at the lower end of its Bollinger Band around ¥83.35, said Teppei Ino, analyst at Bank of Tokyo-Mitsubishi UFJ, noting it rebounded from there on Wednesday.
Many traders think it is only a matter of time, however, before the dollar falls below that level, with talk of options barriers at ¥83.00 and then ¥82.50.
The dollar index has repeatedly failed to break above its 55-day moving average, making the case for more weakness in the currency.
Divergence?
The Australian dollar jumped to a four-month high of $0.9237 after strong jobs data, breaking above $0.92 resistance.
The data boosted expectations of another Australian rate rise, with overnight interest rate swaps pricing in one more rate hike within a year.
The Aussie also hit a record high against the euro beyond A$1.3800 per euro but it made little progress against the yen as yen bulls used the cross instead of dollar/yen to bet on further gains in the Japanese currency.
The Canadian dollar kept Wednesday's hefty gains at C$1.0380 per dollar following a rate hike by the central bank.
"The direction of monetary policy is completely the opposite between the United States and countries like Australia and Canada. So currencies like the Aussie and the Canadian dollar will tend to be favoured," said BNP Paribas' Yoshikawa.
The euro vacillated at $1.2700, after rising about 0.3% on Wednesday as a successful Portuguese debt auction helped soothe fears about government funding in Europe.
Traders said comments by European Central Bank executive board member Juergen Stark to German lawmakers that German banks are undercapitalised helped tip it lower.
Later on Thursday, the Bank of England will hold a monetary policy meeting, where it is expected to keep rates at 0.5% and refrain from increasing its asset purchase programme.
The pound traded at $1.5450, off a 1-½ month low of $1.5296 hit on Tuesday.
The rise in the Aussie failed to give its usual fillip to the US dollar against the yen, via trade in the yen crosses, reinforcing bearish views on dollar/yen.
Traders said there had been speculation that Japanese intervention might be imminent after talk swirled in the market late on Wednesday that Japanese authorities had checked rates, prompting short-term players to go long on the dollar.
But wariness about intervention is tapering off as nothing has happened up to now, and those who bought the dollar might be unwinding their positions, traders said.
Japanese Finance Minister Yoshihiko Noda said on Thursday the ministry was conducting simulations on forex intervention, in a possible reference to rate checks, but the yen hardly budged as the perception remains that Japan is unlikely to intervene until the dollar falls near ¥80.
The dollar slipped 0.3% on the day to ¥83.60, closing in on a 15-year low of ¥83.34 struck on trading platform EBS on Wednesday.
Will they, won't they?
Wariness about intervention lifted the dollar briefly in early trade but it failed to sustain a rise above ¥84, its five-day moving average.
"The US dollar really seems under pressure. There's fear of a 'Japanisation' of the US economy, where growth would stagnate and interest rates fall," said Koichi Yoshikawa, head of FX trading at BNP Paribas.
Shrinking yield gaps between Japan and the US have been a major driver behind the dollar's fall versus the yen since May, as the prospect of continuing low US interest rates has extended and investors wary of risk have moved into bonds.
Japanese investors bought a net ¥731bn of foreign bonds last week, the 17th week in a row of net overseas bond buying. Traders are watching for signs of fund repatriation into yen ahead of half-year book-closing on September 30.
Some market players are now looking to the Japanese ruling party's leadership vote next Tuesday, with Prime Minister Naoto Kan holding only a slim lead over rival Ichiro Ozawa, seen by markets as likely to pursue more reflationist policies.
If Ozawa wins the vote and becomes prime minister, some players say there is likely to be a knee-jerk fall in the yen.
The greenback seems to have support at the lower end of its Bollinger Band around ¥83.35, said Teppei Ino, analyst at Bank of Tokyo-Mitsubishi UFJ, noting it rebounded from there on Wednesday.
Many traders think it is only a matter of time, however, before the dollar falls below that level, with talk of options barriers at ¥83.00 and then ¥82.50.
The dollar index has repeatedly failed to break above its 55-day moving average, making the case for more weakness in the currency.
Divergence?
The Australian dollar jumped to a four-month high of $0.9237 after strong jobs data, breaking above $0.92 resistance.
The data boosted expectations of another Australian rate rise, with overnight interest rate swaps pricing in one more rate hike within a year.
The Aussie also hit a record high against the euro beyond A$1.3800 per euro but it made little progress against the yen as yen bulls used the cross instead of dollar/yen to bet on further gains in the Japanese currency.
The Canadian dollar kept Wednesday's hefty gains at C$1.0380 per dollar following a rate hike by the central bank.
"The direction of monetary policy is completely the opposite between the United States and countries like Australia and Canada. So currencies like the Aussie and the Canadian dollar will tend to be favoured," said BNP Paribas' Yoshikawa.
The euro vacillated at $1.2700, after rising about 0.3% on Wednesday as a successful Portuguese debt auction helped soothe fears about government funding in Europe.
Traders said comments by European Central Bank executive board member Juergen Stark to German lawmakers that German banks are undercapitalised helped tip it lower.
Later on Thursday, the Bank of England will hold a monetary policy meeting, where it is expected to keep rates at 0.5% and refrain from increasing its asset purchase programme.
The pound traded at $1.5450, off a 1-½ month low of $1.5296 hit on Tuesday.
