TOKYO – The yen continued its steep descent on Tuesday, reaching a 15-year low to the euro, as the implications of a steadfastly dovish Bank of Japan kept foreign exchange markets busy engaging in so called ‘carry-trades’.
The Aussie dollar kept near the middle of its recent trading range with the greenback ahead of the Reserve Bank of Australia’s (RBA) policy decision, with money markets positioned for a second meeting with no change. However, there remains a risk of another hike in the second half of the year.
The euro was steady at 150.965 yen after earlier touching 151.03 for the first time since September 2008.
The greenback was about flat at 137.375 yen, and earlier rose to 137.58 for the first time since March 8. A move above 137.90 would be the highest level this year.
“The sign that the BOJ is not going to change its negative interest rate policy any time soon gave the green light for speculators to put yen carry trades back on,” said Naka Matsuzawa, chief Japan macro strategist at Nomura Securities.
The sale of First Republic Bank’s assets to JPMorgan Chase & Co. also gave more confidence to investors over the outlook for the dollar, Matsuzawa said.
“The odds of the Fed continuing on the rate hike process, rather than rate cuts, is now a bit higher.”
The single currency was little changed against the dollar at 1.0982, trading near the bottom of its range of the past week after data overnight showed US manufacturing pulled off a three-year low last month despite a build-up of inflationary pressures.
That keeps the Federal Reserve on track to hike rates by a quarter point on Wednesday. — Reuters
