Yen bounces back
Currencies / 08 Jan '13, 1:14pm
The yen rebounded in Asian trade on Tuesday after suffering weeks of steep declines fuelled by promises from the country's new prime minister to push for more central bank easing.
The dollar weakened to 87.48 yen from 87.89 yen in New York trade, where last week it hit a peak of 88.41 yen, its highest level since mid-July 2010.
Graphic: Renjith Krishnan.
The euro also lost ground to 114.88 yen from 115.09 yen, while the single currency bought $1.3107, against $1.3115 ahead of a closely watched European Central Bank (ECB) meeting later this week.
Japan's currency has been under selling pressure since new Shinzo Abe vowed before his successful election last month to push the Bank of Japan for more aggressive monetary easing.
After taking office at the end of December he repeated his vow as he centres his first weeks in power on fixing the economy.
However, Capital Economics said in a note “we continue to wonder whether this story has much longer to run”,and described the BoJ's policies as “already extremely accommodative”.
Reports quoting Japanese executives as saying that the economy could also be negatively impacted if the yen weakens too quickly also had an impact.
The yen hit record highs around 75 against the dollar in late 2011, hurting exporters by making their products less competitive overseas.
Dealers said markets would focus this week on US central banker speeches, after minutes from the most recent US Federal Reserve meeting - which indicated an earlier than expected end the current easing - sent the dollar surging against the euro and yen.
Markets will also be looking to the ECB's monthly meeting this week for clues about future policy, as well as Spanish and Italian bond auctions, dealers said.
Little action from the ECB is expected, however.
“Given that earlier euro weakness was linked in large part by the revelation that the ECB had contemplated a rate cut at its last meeting, rates inaction this week could well provide additional support for the single currency,” National Australia Bank said in a note. - Sapa-AFP