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Yen heads for best month since October 2008

Tokyo - The yen rose, heading for its best month in more than seven years, as a decline in oil prices boosted demand for safer assets.

Japan’s currency headed for a third weekly gain after oil fell following a report that US crude inventories reached the highest level in data going back to 1930, Japanese stocks dropped on Friday and Treasuries surged on Thursday. The yen reached the strongest in more than two years against the euro on speculation the European Central Bank will expand stimulus at its meeting next month.

The Australian dollar tumbled against all of its Group-of-10 peers after the Wall Street Journal reported that central bank board member John Edwards said the currency is too strong.

“Oil and the decline in US Treasury yields are all that markets need to see and lift the yen,” said Daisuke Karakama, Tokyo-based chief market economist at Mizuho Bank. “The fundamental problem is the slowdown in China” that’s driving stocks lower.

Japan’s currency advanced 0.1% to 113.14 per dollar as of 6:04 a.m. in London from Thursday, when it gained 0.8%. The yen traded at 125.86 against the euro, after earlier reaching 125.39, the strongest level since June 2013.

Haven assets

The yen has gained 7.1% versus the greenback in February, putting it on course for the strongest month since October 2008. Treasury 10-year yields have fallen to 1.73%, from 2.27% at the end of last year. Japan’s benchmark yield fell to minus 0.01%, dropping below zero for the first time in a week.

Japanese authorities will find it “very difficult” to step in should the yen’s appreciation accelerate before Group-of-20 finance ministers and central bankers meet next weekend in Shanghai, said Mansoor Mohi-uddin, senior markets strategist in Singapore at Royal Bank of Scotland Group. With policy makers hands tied in the near term, the dollar will struggle to rise against the yen, he said.

West Texas Intermediate crude slipped 0.6% to $30.60 a barrel after rising the past two days as Japan’s stock benchmark Topix index declined 1.5%.

Aussie, Pound

The Aussie dropped 0.6% to 71.13 US cents, adding to a 0.4% drop from Thursday.

The Aussie “has found a base, and I guess I would say I still think it is a bit too high,” Edwards was quoted as saying in the Wall Street Journal report. Edwards, who has been on the Reserve Bank of Australia’s board since July 2011, also said he would be more comfortable with a level around 65 US cents, though he’s not confident a drop to that level would occur, according to the report.

The pound fell against the euro on speculation the UK will leave the European Union. Prime Minister David Cameron negotiated with fellow EU leaders for a second day as he pleaded for a deal on his nation’s membership of the bloc that he can sell to British voters.

Sterling declined 0.2% to 77.61 pence per euro. It depreciated to 78.98 on February 11, the weakest since December 2014.

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