Dollar Hits 2009 High Versus Yen as U.S. Jobs Gain Tops Forecast
Comment of the Day

March 08 2013

Commentary by Eoin Treacy

Dollar Hits 2009 High Versus Yen as U.S. Jobs Gain Tops Forecast

This article by Joseph Ciolli and John Detrixhe for Bloomberg may be of interest to subscribers. Here is a section
The yen extended a second weekly loss against the dollar as the Ministry of Finance said the deficit in the current account, the widest measure of trade, increased to 364.8 billion yen in January, up from 264.1 billion yen a month ago.

Japan's currency has slumped 9.6 percent versus the dollar this year as Prime Minister Shinzo Abe pushed the central bank to add to stimulus to beat deflation. Haruhiko Kuroda, Abe's pick to become the next Bank of Japan governor, told lawmakers this week the scale of the BOJ's asset purchases was insufficient to achieve its target of 2 percent inflation.

The yen may be due to reverse course, according to a technical indicator. The currency's 14-day relative strength index versus the dollar fell below 30 today, a level that may signal an asset has fallen too far, too quickly.

Eoin Treacy's view Following a 5-year bear market where the Dollar lost almost 40% of its value against the Yen, the currency rallied to break the medium-term progression of lower rally highs by December and continues to rebound. This reversal of fortunes has been driven by Japan's desire to weaken its currency and the relative stability of the Dollar as the economic outlook improves is an additional factor.

The pace of the Dollar's advance moderated from mid-February to form a month-long consolidation. A sustained move below ¥91 would be required to question medium-term scope for continued upside.

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