SINGAPORE (Reuters) – The yen headed for its worst week in two years on Friday, dragged down by rising import costs and low interest rates from Japan, while commodity currencies were expected to post a second weekly gain run on the dollar as export prices remain high.
The euro was slightly weaker this week and was stuck at US$1.1005 on fears that the conflict in Ukraine could hurt the European economy by increasing energy and food costs.
Australia is an exporter of both and rising prices helped the local dollar post a second straight weekly gain of more than 1%. The Aussie was last stable at US$0.7508, just below a four-month high of US$0.7527.
The yen, on the other hand, is plummeting and lost 2.6% against the greenback for the week. It has breached the psychological barrier of 120 to the dollar and at 122.44 is eyeing a major resistance test around 123.70.
He lost nearly 6% through March and was smoked even harder on crossovers, losing around 8% to a resurgent Aussie in just eight sessions.
The latest leg of the slide was triggered by hawkish remarks from Federal Reserve Chairman Jerome Powell this week and a subsequent tear in US yields.
The Bank of Japan (BOJ) also remained, on the other hand, on a dovish tone, although some traders are beginning to believe that at a six-year low the yen is plunging to uncomfortable depths.
“One thing to watch in dollar/yen is the pushback from policymakers in Japan,” said Brent Donnelly, trader and president of analyst firm Spectra Markets.
“I’m not sure we’re there yet, but the 123.50/125.00 level will almost certainly attract attention and generate headlines from Prime Minister (Fumio) Kishida or FinMin (Shunichi) Suzuki,” he said.
“The pushback could also come from the BoJ (Governor Haruhiko) Kuroda.”
The bond market is also putting policymakers between a rock and a hard place by questioning control of the yield curve, which, if defended, could further weaken the yen.
The yield on 10-year Japanese government bonds hit 0.235% on Friday, close to its upper limit of 0.25%.
Inflation is another pressure point, and core consumer prices in Tokyo recorded their fastest annual increase in more than two years this month, data showed on Friday.
Elsewhere, gains in commodity prices supported the New Zealand dollar, although it ran into strong resistance just below US$0.70 and last settled at 0. US$.6964. [NZD/]
The pound hovered at US$1.3190 as traders assess the Bank of England’s cautiously dovish outlook on February data which showed higher than expected inflation. [GBP/]
The Russian ruble traded firm in Moscow overnight after Russian President Vladimir Putin promised to start selling gas to “unfriendly” countries in rubles, but it gave back some gains in tight offshore trading.
It was last at 102.00 to the dollar.
Bid rates for currencies at 00:34 GMT
Description RIC Last US Close Pct Change YTD Pct Highest Bid Lowest Bid
$1.1009 $1.0998 +0.10% -3.16% +1.1011 +1.0995
122.1400 122.3150 +0.09% +0.00% +122.4300 +122.3500
134.46 134.56 -0.07% +3.18% +134.7400 +134.2700
0.9281 0.9301 -0.19% +1.77% +0.9302 +0.9279
1.3193 1.3188 +0.02% -2.47% +1.3198 +1.3189
1.2536 1.2526 +0.09% -0.84% +1.2538 +1.2518
0.7510 0.7514 -0.04% +3.32% +0.7518 +0.7504
Dollar/Dollar 0.6964 0.6965 +0.01% +1.76% +0.6966 +0.6958
Spots of Europe
BOJ Tokyo Forex Market Information
(Reporting by Tom Westbrook. Editing by Sam Holmes.)