Yen dips near a 33-month low against the dollar

London: The yen dipped near a 33-month low against the dollar on Monday after Japan’s prime minister signalled no change to the country’s ultra-loose monetary policy, which its G20 peers earlier refrained from criticising.

Shinzo Abe, poised to nominate a new Bank of Japan governor, said buying foreign bonds could be among options for the central bank, whose policies were among factors driving the exchange rate.

Abe’s comments came after the G20 nations meeting on Friday and Saturday did not single out Tokyo as manipulating currencies to gain a competitive edge.

The dollar rose 0.6 per cent to 94.01 yen, recovering from the low of 92.20 touched on Friday and within reach of a 33-month peak around 94.47 set a week ago, though profit-taking by speculators prevented it from testing that level. Option barriers at 94.50 yen acted as near-term resistance.

Analysts said the yen’s downtrend was intact.

The euro was up 0.2 per cent at 125.32 yen, roughly midway between Friday’s two-week low of 122.90 and a 34-month high of 127.71 yen hit earlier this month.

“The G20 has not clarified much at all and the yen will continue to weaken on pressure from the government on the Bank of Japan to be more accommodative,” said Jane Foley, senior currency strategist at Rabobank.

Foley said she expected the dollar to rise towards 95 yen in the coming weeks. But the pace of its gains would be more gradual because it had already risen a long way in a short time and it could see some consolidation in the near term.

Data showed speculators marginally trimmed strong bets on the yen weakening in the week ended February 12.

Citi have added a new long dollar/yen spot position to their leveraged trade ideas portfolio and are targeting 95.70 yen with a stop loss at 92.55 yen. “We intend this trade to have a holding period under two weeks and then re-evaluate,” they said in a note to clients.

The market’s focus is now on Abe’s choice for BOJ governor, expected in coming days. Sources told Reuters that former top financial bureaucrat Toshiro Muto, said likely to be less radical than other candidates, is the front-runner.

Euro vulnerable

Although it gained against the yen, the euro stayed near three-week lows against the dollar, remaining vulnerable after last week’s data revealed a deeper-than-expected recession in the eurozone and before potentially destabilising elections in Italy.

The euro fell 0.2 per cent to $1.3335, staying above chart support around $1.3310, the 38.2 per cent retracement level of its November-February rally.

The dollar rose to a six-week high against a basket of currencies, with its index hitting 80.727.

The euro, which could encounter more selling pressure ahead of the February 24-25 Italian election, has fallen about 2.5 per cent since peaking at a 15-month high of $1.3711 on February 1 as worries grow about the health of the eurozone economy.

“The (weak euro zone GDP) data has made a rate cut by the European Central Bank more realistic. The euro will come under pressure from its weak economic fundamentals,” said Daisuke Uno, chief strategist at Sumitomo Mitsui Bank.

Markets will focus on flash euro zone Purchasing Managers’ Index data for February later in the week for further indications of how the eurozone economy is faring.