Rising Yen Passes 100 to Dollar
The dollar fell to less than ¥100 during Tuesday’s trading for the first time since the immediate aftermath of the U.K.’s vote to leave the European Union.
Traders said thin trading volume and stop-loss orders exaggerated gains in the Japanese currency, with many market participants off this week for summer holidays.
“Amid extremely thin volume, selling might have kicked in to intentionally induce stop-loss orders,” further weakening the dollar against the yen, said Yuzo Sakai, manager of FX business promotion at Tokyo Forex & Ueda Harlow. He and other market watchers said there was no particular news trigger for Tuesday’s currency movements.
The dollar fell to ¥99.84 late in Tokyo, from ¥101.25 late Monday in New York. Late Tuesday in New York, the dollar was trading at ¥100.31.
Investors have been watching the direction of interest rates in the U.S. and Japan. Weak retail sales in the U.S. have led some investors to take the view that the Federal Reserve might hold off on interest-rate increases. If the Fed did wait, that would be negative for the dollar.
“Investors’ appetite for dollar buying remained low in the wake of downbeat U.S. economic indicators recently. Against that backdrop, I think there were some investors who opted to offload [the dollar] amid weakness in Tokyo stocks,” Mr. Sakai said.
On Tuesday, the Nikkei Stock Average fell 1.6%.
Uncertainty about the Bank of Japan’s direction also continues to create instability in Tokyo markets. After the central bank decided on July 29 not to take significant new easing steps beyond an increase in purchases of stock funds, the yen rose because traders believed the central bank was unlikely to lower interest rates further. Monetary easing is one of the original “three arrows” in Prime Minister Shinzo Abe’s pro-growth “Abenomics” policy. In February, the Bank of Japan introduced a minus-0.1% rate on certain deposits held by commercial banks at the central bank.
“The yen’s strength is accelerating as investors become mindful about the limits of Abenomics,” said Junichi Ishikawa, market analyst at IG Securities.
The dollar fell below ¥100 briefly in intraday trading a day after the U.K.’s vote to leave the EU on June 23, trading around ¥99.
Source: WSJ
