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Sydney - The yen climbed to the strongest level in 18 months against the dollar as declines in Asian shares and signs the Federal Reserve will delay raising interest rates boosted Japan’s currency.
The yen appreciated against all its 16 major counterparts, extending gains to a fourth day versus the greenback since the Bank of Japan (BoJ) unexpectedly refrained from adding to currency-weakening stimulus last week. The dollar declined as traders cut bets the Fed will increase rates this year. Japanese financial markets are shut Tuesday for the first day of a three-day holiday.
“Markets continue to brood post-BOJ coupled with the fact that Nikkei had a very weak close yesterday,” said Vishnu Varathan, a Singapore-based economist at Mizuho Bank.
“You also have a situation where the dollar has continued to weaken, and this has not given the yen wiggle room.”
The yen advanced 0.6% to ¥105.79/$ as of 08:44 after appreciating to ¥105.76, the strongest level since October 2014. Japan’s currency rose 0.4% to ¥122.28/€. The dollar dropped 0.2% to $1.1558 per euro after reaching $1.1566, the weakest since August 25.
A gauge of Asian equities that excludes Japan, where markets are shut, declined for a fifth day. The Nikkei 225 Stock Average slid 3.1% on Monday after dropping 5.2% last week.
Dollar weakens
The dollar declined for a fourth day versus its major counterparts as traders pared bets the Fed will raise rates this year after increasing them in December for the first time in a decade.
The Bloomberg Dollar Spot Index, which tracks the US currency versus 10 major counterparts, dropped 0.3%. It slumped 2% last week as the BOJ’s inaction coincided with Fed chair Janet Yellen reiterating she’s in no rush to boost US borrowing costs.
“The Fed is completely out of the picture now for the next few weeks - even with the June meeting, there’s got to be a lot of doubt about whether the Fed can raise rates,” said Shaun Osborne, chief foreign-exchange specialist at Bank of Nova Scotia in Toronto.
“The dollar has just not done particularly well over the past few weeks as the Fed has moved toward delaying rate hikes, and that’s a situation that definitely will continue, certainly for the near term.”
The dollar fell for a third month against the euro in April, its longest losing streak since 2013, on signs US policy makers aren’t convinced the global and domestic economies can withstand higher borrowing costs. The world’s biggest economy has posted disappointing growth data as nascent signs of recovery emerge in Europe.
