Dollar Extends Gains Vs. Yen to Six-Month High

The dollar extended gains versus the yen in Asia on Tuesday as solid U.S. economic data and growing hopes for additional easing step by the Bank of Japan continued to support a bull run for the U.S. currency.

The greenback rose as high as Y103.38, its highest since May 23, as a rise in share prices encouraged traders to dump the safe-haven yen.

Traders say the dollar’s test of this year’s peak of Y103.74, set in May 22, is well in sight, focusing on a string of U.S. economic indicators due this week, particularly the U.S. November jobs report on Friday.

“It’s only a matter of the time” before breaching that point, said Takahiro Iizuka, a trader at Mizuho Trust and Banking Co.

“A combination of strong U.S. economic indicators and views held among foreign investors that the BOJ will take further stimulus has been the key driver behind the recent rally,” Mr. Iizuka said.

At 0450GMT, the dollar is at Y103.31 against Y102.93 in late New York Monday. The euro is at $1.3537 against $1.3542.

Faced with the dollar’s rally, exporters are holding back from selling, while importers are keen to buy dollars on dips, limiting its slide, Mr. Yoshida added.

The U.S. ISM manufacturing Purchasing Managers Index unexpectedly increased to 57.3 in November–the highest since April 2011–from 56.4 in October.

Monday’s remarks by the BOJ Gov. Haruhiko Kuroda suggesting that the BOJ’s massive easing steps launched in April would continue after the end of 2014 also prompted traders to sell yen.

While the BOJ is currently proceeding with aggressive easing to double the size of the monetary base it will pump into the economy to Y270 trillion by the end of 2014, mainly through massive purchases of the government bonds, it hasn’t disclosed its plan beyond that period.

“I had expected some downward adjustments to take place, but the dollar is likely to keep testing this year’s high,” said Osao Iizuka, head of FX trading at Sumitomo Mitsui Trust Bank.

The yen also weakened against other major currencies, with the British pound rising as high as Y169.14 and the euro climbing close to Y140.00, both the highest since October 2008.

Meanwhile, the Japanese currency briefly rose against the Australian dollar following the Reserve Bank of Australia’s statement repeating that the Australian dollar is “uncomfortably high.” But its move was short-lived, traders said.

Source: Marketwatch