Yen Slips from Near 4-Year Peak Vs Dollar
Thursday April 1, 10:40 pm ET
By Hideyuki Sano
TOKYO (Reuters) - The yen slipped from near a four-year peak against the dollar on Friday as Japanese investors bought fresh foreign assets at the start of the new financial year in a market otherwise becalmed ahead of key U.S. jobs data.
"Japanese investors' fresh investment is blossoming," said a trader at a major Japanese bank.
"But this will take place only in Asian markets," he said, adding that participants remained focused on the non-farm payrolls data due at 8:30 a.m. EST.
Japanese investors, frustrated by near-zero interest rates at home and seeking higher returns abroad, are allocating fresh money for the fiscal year that kicked off on Thursday.
Dollar bulls are hoping the jobs data will show the U.S. recovery has finally started to create enough jobs to allow the Federal Reserve to think about hiking interest rates.
Economists on average expect 103,000 more jobs were created in March than in February, while some traders forecast a larger figure.
Still, most traders were cautious as the data has had a habit recently of causing disappointment. The February payrolls data posted a rise of just 21,000 and sent the dollar reeling as it dented hopes for a Fed rate hike in the near future.
The Fed fund rate is at one percent, the lowest level since 1958. Low U.S. rates are thought to have worked against the dollar as they discourage foreign investors from buying U.S. bonds.
"I'd say the dollar will be sold if the (jobs) data is in line with expectations, and even a strong reading would just give it a mild boost," said Junya Tanase, forex strategist at JP Morgan Chase in Tokyo.
"The dollar's longer term downtrend is unchanged."
Tanase said the Fed was unlikely to consider lifting rates until payroll figures show jobs growth of around 150,000 or more for several consecutive months.
As of 10:12 p.m. EST Thursday, the dollar was around 104.20 yen up about 0.5 percent from late U.S. trade.
Still, it was not far from the four-year low of 103.40 hit on Wednesday while the yen rides high on growing optimism the Japanese economy may be staging its strongest recovery since the bursting of the asset bubble more than a decade ago.
100-YEN LEVEL
Many analysts say that given improving economic fundamentals, large foreign buying of Japanese stocks, and the Japanese authorities apparent scaling back of currency intervention, the yen would soon challenge the 100 per dollar mark.
Japan's top financial diplomat, Zembei Mizoguchi, said on Friday that Tokyo's stance on foreign exchange was unchanged, and that it would continue to act as needed in the market.
Toshiaki Kimura, group manager of forex trading at Mitsubishi Trust and Banking, said that the dollar may drop below 103 yen in April, and could test 100 yen by June.
The Nikkei average gained 0.86 percent in morning trade, as foreign investors continued to pour capital into Japanese assets.
The latest data from the Finance Ministry on weekly capital flows shows that net purchases of Japanese stocks by foreigners from March 1 to March 26 totaled 2.58 trillion yen ($24.88 billion), which would likely make the month of March a record.
The euro was largely unchanged around $1.2360 compared with around $1.2365 in late U.S. trade and Thursday's 10-day high around $1.2390, hit after European Central Bank President Jean-Claude Trichet said the bank was in no hurry to cut rates.
While the bank kept policy unchanged as expected, Trichet wrong-footed many traders, who had been expecting him to signal a rate cut in coming months to help shore up sluggish euro zone economies.
The euro rose to 128.70 yen from around 128.12 in late U.S. trade.
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