The yen rallied from the lowest level in more than four years against the dollar as technical indicators signaled its recent decline was too rapid.
The yen touched the weakest since October 2008 yesterday as the U.S. economy showed continued signs of recovery and Treasury yields touched a seven-week high. The euro advanced today, snapping a three-day decline, before data forecast to show German investor confidence rose this month. The Australian and New Zealand dollars climbed as gains in Asian stocks boosted demand for riskier assets.
“The sheer scale of the yen move has given the impression that it’s a one-way bet, and in currency markets there aren’t any one-way bets,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. (WBC) in Sydney. “The arguments for buying the U.S. dollar on the notion of the Fed tapering off QE any time soon are quite thin,” he said, referring to the the Federal Reserve’s program of so-called quantitative easing.
The yen strengthened 0.3 percent to 101.5 per dollar at 10:22 a.m. in Tokyo from yesterday, when it touched 102.15, the weakest since October 2008. It was little changed at 132.18 per euro. The 17-nation euro gained 0.4 percent to $1.3020, after falling 1.4 percent in the previous three sessions. The Swiss franc climbed 0.5 percent to 95.30 centimes per dollar.
Australia’s dollar rose 0.4 percent to 99.92 U.S. cents. New Zealand’s currency advanced 0.4 percent to 82.83 U.S. cents.
U.S. 10-year Treasury yields touched 1.94 percent yesterday, the highest level since March 26. The MSCI Asia Pacific Index of stocks gained 0.4 percent today.
The yen’s 14-day relative strength index versus the dollar yesterday fell below the 30 level which indicates an asset price has fallen too rapidly and it may be poised to reverse course. The Japanese currency’s RSI against the euro was at 33.
The ZEW Center for European Economic Research in Mannheim will probably say its index of investor and analyst expectations, which aims to predict economic developments six months in advance, rose to 40 from 36.3 in April, according to the median estimate of economists surveyed by Bloomberg News before the data today.
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