BEIJING: The yen reinforced its power against the dollar and the euro in Asian trade Friday, with the surprise of the Swiss central bank’s move to crumb its long-standing currency cap appealing buying of the safe-haven Japanese currency.
The greenback went as low as Y115.85, its lowest since Dec. 16, before recovering to Y116.42 around 0450 GMT. The U.S. currency was at Y116.31 late Thursday in New York.
On Thursday, the Swiss National Bank scrapped its policy of capping the Swiss franc at a level of 1.20 to the euro ahead of the European Central Bank’s policy meeting on Jan. 22. The ECB is widely expected to ease monetary policy further through purchases of sovereign bonds, or “quantitative easing.”
“A higher Swiss franc and a lower euro are having a ripple effect on the entire currency market,” said Mizuho Securities chief FX strategist Kengo Suzuki. He added that rapidly rising volatility deepened risk aversion following the SNB’s move, putting upward pressure on the yen, considered a safe haven like the Swiss franc that retains value in times of financial turbulence.
“The yen looks stronger on whole when compared with rival currencies,” Mr. Suzuki said.
The dollar drifted lower to around Y116, despite dip-buying by Japanese importers and others. With instability in the stock market continuing to stoke risk aversion, that brings the dollar into sight of the recent low of Y115.56 set Dec. 16.
The Nikkei Stock Index extended losses in early afternoon trading, with the benchmark having fallen 2.2% as of midday.
The euro slipped to Y134.70, its weakest since Oct. 16, before recouping some losses to reach Y135.38 at midday. That compared with Y135.24 overnight.
In other currency trading, the euro was at CHF1.010 from CHF1.009 in New York, and at $1.1631 from $1.1618.
The dollar will likely be well-supported around Y115 for some time, with dip-buying at that level as long as expectations for the U.S. economy remain unchanged, said Minori Uchida, chief market analyst at global markets research at Bank of Tokyo-Mitsubishi UFJ. But if expectations for eventual rate increases recede in the wake of upcoming U.S. economic indicators for January, the dollar may fall below Y115 toward Y114 or Y113, Mr. Uchida said.
He said the dollar at around Y110 would be consistent with the gap between U.S. and Japanese bond yields. Expectations for the U.S. economy and the likelihood of more ECB monetary easing have been keeping the dollar at prevailing rates. While the former have been tempering, an actual ECB decision to expand its easing program through bond purchases may translate into slight dollar selling after the market digests the headlines.
shanghai shares start week with losses 25 june 2018
Hong Kong, (UrduPoint / Pakistan Point News - 25th Jun, 2018 ) :Hong Kong and mainland Chinese stocks fell on...
