Yen Advances to 18-Month High as Dollar Drops on Fed Outlook

Will Next Jobs Report Force the Feds Hand?
  • Japan's currency gains for fourth day since BOJ met last week
  • `Markets continue to brood post-BOJ,' Mizuho's Varathan says

The yen climbed to the strongest level in 18 months against the dollar as declines in Asian shares and signs the Federal Reserve will delay raising interest rates boosted Japan’s currency.

The yen appreciated against all its 16 major counterparts, extending gains to a fourth day versus the greenback since the Bank of Japan unexpectedly refrained from adding to currency-weakening stimulus last week. The dollar declined as traders cut bets the Fed will increase rates this year. Japanese financial markets are shut Tuesday for the first day of a three-day holiday.

“Markets continue to brood post-BOJ coupled with the fact that Nikkei had a very weak close yesterday,” said Vishnu Varathan, a Singapore-based economist at Mizuho Bank Ltd. “You also have a situation where the dollar has continued to weaken, and this has not given the yen wiggle room.”

The yen advanced 0.6 percent to 105.79 per dollar as of 7:44 a.m. in London after appreciating to 105.76, the strongest level since October 2014. Japan’s currency rose 0.4 percent to 122.28 per euro. The dollar dropped 0.2 percent to $1.1558 per euro after reaching $1.1566, the weakest since Aug. 25.

A gauge of Asian equities that excludes Japan, where markets are shut, declined for a fifth day. The Nikkei 225 Stock Average slid 3.1 percent Monday after dropping 5.2 percent last week.

Dollar Weakens

The dollar declined for a fourth day versus its major counterparts as traders pared bets the Fed will raise rates this year after increasing them in December for the first time in a decade.

The Bloomberg Dollar Spot Index, which tracks the U.S. currency versus 10 major counterparts, dropped 0.3 percent. It slumped 2 percent last week as the BOJ’s inaction coincided with Fed Chair Janet Yellen reiterating she’s in no rush to boost U.S. borrowing costs.

“The Fed is completely out of the picture now for the next few weeks -- even with the June meeting, there’s got to be a lot of doubt about whether the Fed can raise rates,” said Shaun Osborne, chief foreign-exchange specialist at Bank of Nova Scotia in Toronto. “The dollar has just not done particularly well over the past few weeks as the Fed has moved toward delaying rate hikes, and that’s a situation that definitely will continue, certainly for the near term.”

The dollar fell for a third month against the euro in April, its longest losing streak since 2013, on signs U.S. policy makers aren’t convinced the global and domestic economies can withstand higher borrowing costs. The world’s biggest economy has posted disappointing growth data as nascent signs of recovery emerge in Europe.

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