The yen pushed deeper into multi-year lows versus the dollar and euro on Tuesday as the market saw every reason to sell the currency with the Japanese central bank on a warpath to battle deflation.
The dollar rose to as high as 99.67 yen on trading platform EBS, the greenback’s strongest level versus the yen since May 2009. The dollar later pulled back a bit on profit-taking and last stood at 99.25 yen, down 0.1 per cent on the day.
The euro hit its highest since January 2010 against the yen of 129.935 yen. The euro last changed hands at about 129.59 yen, up 0.3 per cent from late US trade on Monday.
Since the Bank of Japan (BOJ) unveiled a massive stimulus programme last Thursday, the dollar has climbed roughly 7 per cent against the yen.
“For USD/JPY, upside momentum remains strong and an eventual test of 100.00 seems in the cards, though there are likely to be a number of barriers between 99.50 and 100.00,” said Vassili Serebriakov, strategist at BNP Paribas.
“Markets are increasingly focussed on the notion that larger JGB purchases at longer maturities by the BOJ could push Japanese domestic long-term investors elsewhere.”
Speculation that Japanese investors might start increasing overseas investment in search of higher yields has helped trigger a rally in some European bond markets in recent sessions, with French 10-year bond yields hitting a record low on Monday.
Some market players sold the dollar on Tuesday to lock in profits, and there was talk of dollar offers in the 99.80 yen to 100.00 yen area, a trader for a US bank in Singapore said.
Underscoring the Japanese currency’s weakness, commodity currencies touched multi-year highs against the yen on Tuesday, with the Australian dollar hitting its highest since July 2008 at about 103.80 yen and the New Zealand dollar rising to its highest since February 2008 at about 84.49 yen .
The Australian dollar gained a quarter of a cent against the US dollar after data showed China’s annual consumer inflation eased to 2.1 per cent in March from February’s 3.2 per cent, leaving Chinese policymakers room to keep monetary policy loose to support an economic recovery.
The Aussie dollar hit an intraday high of US$1.0448 after the Chinese inflation data and last fetched US$1.0432, up 0.2 per cent from late US trade on Monday.
Elsewhere, the euro rose 0.4 per cent to US$1.3059, having triggered some stop-loss buying at levels near US$1.3050.