Yen Holds Declines as Equity Rebound Tempers Demand for Safetyby and
Stocks rally after China central bank cut reserve ratio Monday
Currency rose 7.1% versus euro, 7.5% against dollar last month
The yen held losses against most of its major counterparts as equities in Asia extended gains after monetary stimulus in China earlier this week brightened prospects for the world’s second-largest economy.
Japan’s currency remained lower against 14 of its 16 main peers after China’s central bank on Feb. 29 cut the amount of cash lenders must hold in reserve. Demand for the yen as a haven from turmoil in global markets saw it post a 7.5 percent advance against the dollar in February, its biggest gain since October 2008.
“We’ve seen March get off to a positive start for risky assets, so that has provided a convenient excuse to cash out some of the yen’s big gains from last month,” said Joe Manimbo, an analyst with Western Union Business Solutions, a unit of Western Union Co., in Washington. “It’s tentative at best.”
The yen was at 113.78 per dollar as of 9:12 a.m. in Tokyo on Wednesday, from 114.01 in New York, where it depreciated 1.2 percent. It was little changed at 123.78 per euro, after touching a three-year high of 122.09 on Tuesday.
The world-beating advance in the yen this year has fueled concern the stronger exchange rate will hurt Japan’s exporters and weigh on growth. While that’s prompted officials to try to stabilize the currency by hinting at measures to curb its gains, the government said Monday that it didn’t intervene in the foreign-exchange market between Jan. 28 and Feb. 25.
The PBOC’s decision to cut its reserve requirement ratio marked the first time in four months that it’s used one of its traditional monetary-easing tools amid growing signs the economy is weakening.
“The RRR announcement offered something for everyone,” said Sean Callow, a foreign-exchange strategist in Sydney at Westpac Banking Corp. “You could welcome the easing as supportive of growth and indicative of less pressure from capital outflows, or you could see it as a reflection of even greater weakness than expected.”