The yen may slide to 110 per dollar in the next six months after it breaches the 100 level for the first time in four years, according to Macquarie Bank Ltd.’s David Forrester.
The 100 level is a technical barrier to further yen depreciation, Forrester, senior vice-president for Group of 10 foreign-exchange strategy at Macquarie in Singapore, said in an interview on Bloomberg Television’s “First Up” with John Dawson. A decline to 110 would mark the yen’s weakest level since August 2008.
The yen’s downward move may be exacerbated by stop-loss orders, which are placed by investors to automatically sell assets when declines of a specific threshold are reached, according to Forrester. The market still needs “something more” to push the yen past 100, he said.
“There’s a good chance that you’ll see some stop-loss runs above 100, and it will quickly move toward a 101, 102 level,” Forrester said. “Longer term, over the coming six months, we could get to 110.”
Japan’s currency rose 0.1 percent to 99.34 per dollar at 11:04 a.m. in New York after earlier declining as much as 0.3 percent. The yen touched 99.95 percent on April 11, its weakest level since April 2009.
The dollar also may be driven higher versus the yen as the U.S. economy strengthens and if the Federal Reserve cuts back on its program of buying bonds to spur growth, according to Forrester.
“U.S. economic data is going to improve,” Forrester said. “We also think the Fed, by year-end, might need to be trimming its asset purchases. There are good reasons for 110 on a fundamental basis.”
The yen has declined 11 percent this year, the worst performance among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. The dollar rose 3.6 percent and the euro climbed 1.9 percent.