The yen strengthened from the lowest level in almost four years against the dollar on speculation its 6.4% slump against the greenback in the past three days was too rapid.
Japan’s currency advanced versus the majority of its 16 most-traded peers after sliding earlier to 99.66 per dollar, the weakest level since May 2009. Australia’s dollar advanced for a second day as monetary stimulus in the U.S. and Japan boosted demand for higher-yielding assets. Thailand’s baht climbed to the strongest since 1997 against the greenback as demand for the nation’s bonds rose.
“It may be a bit of a pause for breath after a pretty large move,” Brian Daingerfield, a currency strategist at Royal Bank of Scotland Group Plc’s RBS Securities unit in Stamford, Connecticut, said in a phone interview. “We still think the trend for a weaker yen should continue. One hundred for dollar-yen looks clearly in sight.”
The Japanese currency gained 0.5% to 98.89 per dollar at 9:35 a.m. in New York after earlier weakening as much as 0.3%. The yen rose 0.1% to 129.15 per euro. The euro strengthened 0.4% to $1.3062.
The most accurate Polish zloty forecasters say a bond rally that drove yields to record lows will peter out as the currency weakens. Poland’s economy, the only one in the European Union to avoid a recession since 2009, will expand 1.2% this year, the slowest pace since 2001, the European Commission forecasts.
The zloty gained 0.3% to 3.1611 per dollar.
Malaysia’s currency gained amid optimism pro-growth policies will gain momentum following national elections due in the coming weeks, attracting global investment. The ringgit rallied 0.7% to 3.0365 to the greenback.
The yen strengthened after its 14-day relative strength index against the greenback dropped to 27 yesterday, below the level of 30 that some traders see as a sign an asset has fallen too quickly.
Bank of Japan officials led by Governor Haruhiko Kuroda said after a policy meeting last week they would boost monthly bond purchases to 7.5 trillion yen ($80 billion) as they set a two-year horizon for their goal of 2% inflation. They suspended a cap on some bond holdings and dropped a limit on debt maturities.
The yen slumped 22% in the past six months, the worst performer of the 10 developed-market currencies tracked by Bloomberg Correlation Weighted Indexes, on the government’s pledge to increase stimulus to end 15 years of deflation. The dollar gained 1.1% and the euro climbed 2.6%.
“We haven’t been at 100 for a long time, and there’s a lot of barriers around there,” said Geoff Kendrick, head of European currency strategy at Nomura International Plc in London. “The yen will probably go through 100 versus the dollar shortly and then slow down.”
Three-month implied volatility for the yen against the dollar fell to 13% today after climbing to 13.6%, the highest level since March 2011.
The yen is near a key Fibonacci level that may temporarily interrupt its decline, according to Max Knusden, a currency analyst at ADS Securities LLC in Abu Dhabi.
“Prices have almost reached this week’s first key profit- taking target at 99.72, a 50% recovery to the bear market between 2007 and 2011,” he wrote in a note to clients. “As an important target for sentiment, some profit taking is likely.”
Fibonacci analysis is based on the theory that prices rise or fall by certain percentages after reaching a new high or low.
The Australian dollar advanced against all of its 16 major peers as the BOJ decided at its April 3-4 meeting to step up bond purchases under the quantitative-easing stimulus strategy also used by the U.S. central bank.
“It’s QE everywhere,” said Hans Kunnen, chief economist at St. George Bank Ltd. in Sydney. “We’re not engaging in that practice, so the Aussie dollar should strengthen against the euro, U.S. dollar and yen simply on the basis of the interest- rate structure and a relative lack of supply.”
The Australian dollar strengthened 0.7% to $1.0489 after gaining 0.3% yesterday. The currency was up 0.3% to 103.73 yen and touched 103.83 yen, the highest since July 2008.
Thailand’s baht climbed 0.8% to 29.01 per dollar and reached 28.92, the strongest since July 1997, as demand for the nation’s bonds rose amid the monetary easing in Japan.
“With floods of cash in Japan where rates are so low, investors are seeking higher returns, and in this region, Thailand looks good thanks to its stable economy and political situation,” said Tsutomu Soma, manager of Rakuten Securities Inc.’s fixed-income business unit department in Tokyo. “The weaker yen won’t be harmful for Thailand, as it doesn’t compete with Japan, unlike South Korea or China.”