Yen hovers near 15-year peak vs dollar as euro falls

By Wanfeng Zhou

NEW YORK (BestGrowthStock) – The yen hovered near a 15-year high against the dollar on Thursday as conflicting messages from policymakers led investors to bet Japanese authorities were not ready to intervene to weaken their currency.

The euro fell (Read more about the trembling euro. ) against the dollar and yen as concerns about the health of the European banking sector and sovereign debt issues persisted.

Japanese Finance Minister Yoshihiko Noda said his ministry was conducting simulations on forex intervention. But his comments were somewhat undermined after Bank of Japan Governor Masaaki Shirakawa said he did not discuss currencies and monetary policy at a government meeting.

Analysts expect the yen to stay firm in the coming months as uncertainties about the outlook for the United States and global economies prompt investors to seek safety. The market still thinks Japan is unlikely to intervene until the dollar falls near 80 yen.

“We saw the continued differences in opinion between the Ministry of Finance and the Bank of Japan,” said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.

“The momentum is still favoring a stronger yen. But the concern about the possibility of intervention is keeping the yen from rallying much further,” he added.

In late trading in New York, the dollar was down 0.1 percent at 83.82 yen. It earlier hit a session low of 83.49, according to electronic trading platform EBS, within sight of the 15-year low of 83.34 yen hit on EBS on Wednesday.

Nomura bank expects the dollar to fall to 82.5 yen by the end of the year and weaken to 80 yen by March, 2011.

Options traders said there was good demand for yen calls in the 1- to 2-month bracket, but yen puts were more popular in shorter dates, suggesting investors are hedging their bets about possible intervention.

“Markets try always to move to what we have called ‘the obscene number’ before turning around, and given that the all-time high for the yen is just below 80, it seems reasonable to assume that we shall at least visit that level before turning in the other direction,” said analyst Dennis Gartman, of the Gartman Letter.

Traders expect the yen to weaken if Japanese authorities intervene, although longer-term investors point to the failure of recent Swiss national bank intervention to stifle the franc’s strength.

EURO ZONE WORRIES

The euro was down 0.2 percent at $1.2701 after failing to convincingly break resistance at $1.2760.

Against the yen, the euro fell (Read more about the trembling euro. ) 0.1 percent to 106.54 after hitting a session low of 105.98 yen, moving closer to a nine-year low of 105.41 yen hit in late August.

The euro’s weakness came despite a slight increase in risk appetite, which got a boost after better-than-expected U.S. jobless data and trade activity raised hopes the economic recovery would accelerate.

“The euro is under pressure because Europe is still plagued with sovereign risk,” said Kathy Lien, director of currency research at GFT. “The European debt story is a fungus that won’t go away and keeps coming back.”

The euro zone currency came under heavy pressure this week after a news report that recent stress tests of the European banks sector underestimated some lenders’ holdings of potentially risky government debt.

The Australian dollar extended gains as a barrier was taken out at $0.9250. It hit a four-month high on strong jobs data and rising speculation of a rate rise. The Aussie dollar last traded up 0.6 percent at 0.9241.

(Additional reporting by Nick Olivari; Editing by Dan Grebler)

Yen hovers near 15-year peak vs dollar as euro falls