Yen Seeking New Ceiling as Volatility Eases Amid Calmer Markets

  • Dollar index snaps three-day advance before U.S. economic data
  • Markets are far from being stable: Mizuho Securities' Yoshii

The yen held losses that capped its steepest two-week advance since 1998 as an easing in global financial market turmoil sapped volatility from the market.

Japan’s currency remained lower against most of its major counterparts after a measure of foreign-exchange fluctuations retreated from its highest level in more than four years. Crude oil prices climbed for a second day and Chinese shares got a boost from data showing a surge in lending last month. New Zealand’s dollar dropped as bets on lower interest rates firmed after the central bank said a gauge of inflation expectations plunged to its lowest level in almost 22 years.

“Moves last week were too rapid and markets are taking a break,” said Kenji Yoshii, a currency strategist at Mizuho Securities Co. in Tokyo. “There are still uncertainties over China and oil prices that are keeping rebounds in check. Markets are still far from being stable.”

The yen was little changed at 114.55 per dollar as of 6:45 a.m. in London, after falling 1.2 percent on Monday, the biggest slump since Jan. 29. It was at 127.81 against the euro from 127.84. Japan’s currency jumped almost 7 percent against the greenback during the past two weeks.

The greenback is just below the level of 115 yen, which represents a 38.2 percent retracement of the latest drop against the yen over the past two weeks, Hiroyuki Yamamuro, an analyst in Tokyo at Ueda Harlow Ltd., which provides margin-trading services, wrote in a note to clients. The currency is also near the lower end of the ichimoku cloud on a weekly chart, he wrote in the note. “Given that the 115 level is psychologically key, dollar-yen lacks momentum to break past that level.” 

Dollar Stalls

A gauge of the dollar snapped a three-day advance before U.S. reports this week on industrial production, housing starts and producer prices. The Bloomberg Dollar Spot Index fell 0.1 percent to 1,224.48, extending its loss for the year to 0.7 percent.

Traders see about a 30 percent probability the Federal Reserve will raise interest rates in 2016, according to futures data compiled by Bloomberg, compared with more than 90 percent at the end of last year.

New Zealand’s currency fell 0.8 percent to 65.96 U.S. cents after central bank data showed two-year ahead inflation expectations fell to 1.63 percent from 1.85 percent. That’s the lowest since the second quarter of 1994 and well below the 2 percent midpoint of the Reserve Bank of New Zealand’s 1-3 percent target range.

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