Dollar Close to Taking out 2007 Highs against Japanese Yen

The U.S. dollar shot even higher against the Japanese yen on Monday, skirting levels not seen since 2007, in the wake of last week’s strong data out of the U.S. and a big stimulus package out of Japan.

In addition, an official gauge of China factory activity released over the weekend, showed activity fell to a five-month low in October, suggesting more help may be needed for the world’s biggest economy.

The dollar also traded near that 7-year yen high on Friday after unexpected stimulus from Japan. On Monday, the dollar USDJPY, +1.08% surged 1.4% to ¥113.76 from ¥112.33 late Friday. Late Thursday, ahead of the BOJ, the currency traded at ¥109.22.

Strategists are watching to see if the dollar takes out a major resistance level — ¥114.02 hit in late December 2007.

Kit Juckes, global macro strategist at Société Générale, said in a note that now that the dollar has taken out ¥112.80, that opens a path to ¥115, and then the 2007 high above ¥123. “Adjust those levels for inflation and they make the yen look ludicrously cheap, but that’s not really relevant until the economy gets back on an even keel,” he said in a note.

Big data from the U.S. comes this week — nonfarm payrolls on Friday. John Hardy, head of FX strategy at Saxo Bank, said in a commentary on the bank’s Web site, that another strong batch of data this week and the next month, could keep the dollar charging against the yen.

The yen also tumbled against the British pound GBPJPY, +1.24% , dropping 1.3% to ¥182.01 and the euro EURJPY, +0.92% , down 1% to ¥142.29.

The WSJ Dollar Index BUXX, +0.61% a measure of the dollar against a basket of major currencies, was up 0.2% to 78.96. The ICE Dollar Index DXY, +0.21% rose to 86.10 from 86.907.

The euro EURUSD, -0.15% fell to $1.2505 from $1.2526 late Friday, but broke the Oct. 3 low of $1.2501, noted Christ Weston, chief market strategist at IG in a note.

“The fact the euro has also fallen relative to the yen and British pound (despite growing concerns from Angela Merkel about the U.K. leaving the EU) highlights the fact traders are now expecting some sort of retaliation from the ECB at this Thursday’s central bank meeting,” said Weston, though he added that’s probably unlikely, as the central bank will wait to see if the current round of measures will boost inflation expectations. Read: Don’t miss these 5 highlights in Europe this week

The British pound GBPUSD, +0.16% slipped to $1.59863 from $1.5999 late Friday, after manufacturing PMI for the U.K. beat expectations.

Source: MarketWatch