Yen down from 15-year peak versus dollar

By Nick Olivari

NEW YORK (BestGrowthStock) – The yen pulled back from 15-year highs against the U.S. dollar on Wednesday on mounting speculation that Japanese authorities may intervene to stem the currency’s rise for the first time since March 2004.

Japan has not been immune to the deep global recession, and a strong yen will dampen demand for Japanese exports, offsetting other measures to stimulate the economy.

The euro recovered from a nine-year low against the yen, supported by strong German economic data. The dollar remained under pressure after weaker-than-expected U.S. durable goods orders and a dive in new home sales in July, despite gains on the day against the yen.

Traders were reluctant to keep betting on further yen gains after Japanese Finance Minister Yoshihiko Noda repeated he would respond to yen moves when necessary. His comments followed a Nikkei newspaper report that his ministry may consider unilateral yen-selling intervention.

On Tuesday the dollar posted its worst day versus the yen since May while the euro broke under a key resistance level.

“Nothing in Japanese politics or the economy warrants the fundamental strength of the yen,” said Joseph Trevisani, chief analyst at FX Solutions in Saddle River, New Jersey. “It is almost purely a case of fear in world markets.”

Trevisani said dollar/yen should be trading around 105 yen based on analysis of the relative economic fundamentals.

News that Bank of Japan Governor Masaaki Shirakawa will attend an annual U.S. Federal Reserve conference in Jackson Hole, Wyoming, this week was also making some investors wary of buying yen, analysts said.

Some analysts said Shirakawa’s travel plans had increased speculation that Japanese authorities may be preparing to act on the yen. At the same time, others argue the central bank is unlikely to hold an emergency policy meeting in his absence.

In late afternoon trading in New York, the dollar was up 0.8 percent on the day to 84.63 yen, though still within reach of the 15-year low touched on Tuesday, according to Reuters data.

Traders said there was higher demand for short-term dollar/yen options with an 85.00 yen strike price as intervention jitters increased.

Demand for the dollar had briefly faltered after reports showed new orders for long-lasting U.S. manufactured goods rose far less than expected in July. Excluding transportation, orders posted the biggest fall since January 2009.

Another report showed new U.S. single-family home sales fell in July to the slowest pace on record.

“Clearly the economy is slowing markedly, and it’s a broad-based slowdown,” said Michael Woolfolk, a senior currency strategist at BNY Mellon in New York.

“It’ll be difficult for the dollar to rally against the yen in this environment, though it’s worth noting that yen gains on the crosses — against the euro, sterling and elsewhere — have been even more remarkable.”

EURO SEE-SAWS

The euro traded 0.9 percent higher at 107.05 yen, though the euro zone single currency was down from the day’s high of 107.66 yen.

Against the dollar, the euro was 0.2 percent higher on the day at $1.2651 after trading as high as $1.2725.

Analysts said optimism from German data showing that business morale hit a more than three-year high in August was offset by concerns about fiscally weak euro zone countries, reflected in a wider yield spread between 10-year Irish and German bonds.

The yields were at their widest since May.

Standard & Poor’s on Tuesday downgraded its rating on Ireland one notch to AA-minus with a negative outlook, fanning worries about euro zone sovereign debt and the banking system.

Risk aversion supported the Swiss franc and drove the euro to a lifetime low of 1.2971 francs on EBS and 1.2973 on Reuters.

The dollar fell 0.1 percent to 1.0302 francs with the session low at 1.0250 francs, a seven-month low.

(Additional reporting by Steven C. Johnson and Vivianne Rodrigues; Editing by James Dalgleish)

Yen down from 15-year peak versus dollar