The euro, which jumped broadly after stronger than expected business activity data in France and Germany, hit 165.62 yen, its highest since 2008
The yen hit new multi-year lows against the dollar and the euro on Tuesday, keeping investors on heightened intervention watch ahead of the Bank of Japan’s meeting this week, while dovish policy maker chatter left sterling around its softest in months.
The euro, which jumped broadly after stronger than expected business activity data in France and Germany, hit 165.62 yen, its highest since 2008.
That is a combination of the stronger euro today, with the services data moving back into expansionary territory, an encouraging sign that the headwinds to growth for consumer spending are continuing to fade, and the yen continuing to weaken on the expectation that the Bank of Japan will be very gradual in tightening policy, according to Lee Hardman, senior currency strategist at MUFG.
The dollar advanced to 154.87 yen, its highest since 1990, edging ever closer to 155, a level considered by many participants as the new trigger for intervention by Japanese authorities.
Japanese Finance Minister Shunichi Suzuki said last week’s meeting with his U.S. and South Korean counterparts has laid the groundwork for Tokyo to act against excessive yen moves, the strongest warning till date on the possibility of intervention.
Nevertheless, there are doubts about whether Tokyo will act so close to the Bank of Japan’s two-day policy meeting that starts on Thursday.
Japan’s central bank is expected to project inflation will stay near its 2% target for the next three years in new forecasts due on Friday, indicating its preparedness to cautiously hike interest rates again this year from current near-zero levels.
We have had jawboning now for a number of weeks, and they still have not come in and intervened directly in the forex market. So people are questioning what’s going to bring them to the table, said Hardman.
The euro advanced against more than just the embattled yen, jumping 0.2% on the dollar to $1.06753, having stabilised after losses earlier in the month.
The common currency advanced 0.16% on the pound to 86.39 pence, having briefly matched the previous day’s four month high of 86.43 pence, after the German PMI data.
