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. Last Updated: 07/27/2016

Dollar Hits High Against Yen




LONDON -- The dollar rose to five-month highs within sight of the psychological 110 level against the yen on Tuesday, boosted by increasing concern over the outlook for the Japanese economy.


The yen continued to be dragged down by a bearish mood that set in when Economic Planning Minister Taichi Sakaiya said Sunday gross domestic product probably contracted for the second quarter in a row in the October to December period.


Although efforts by top Japanese officials to soothe concerns about the potential for the economy to turn sick temporarily slowed down the pace of the dollar's rise against the yen, many operators were eager to test it above 110 yen in the near term.


"We can put this move down to the attention the Japanese economy is getting right now," said Jane Foley, currency strategist at Barclays Capital in London.


"We can get through the 110 level in this quarter, though probably not today," she added.


The dollar climbed as high as 109.50 yen in early European trade, its strongest since Sept. 10.


The euro rallied a cent against the dollar as investors took out short positions made after German jobless data, but analysts said it would look to outside influences to assist its appreciation from here.


The euro had firmed above $0.9880, up 1 percent on the day, wiping out losses seen after the German seasonally adjusted jobless total fell by 33,000 in January, less sharply than market participants had expected, and the unadjusted unemployment rate rose to 11 percent from 10.3 percent in December.


The euro/yen rate was bolstered to a three-week peak at 108.03, a rise of more than 5 percent from its 102 record low set Jan. 3.


Japanese Finance Minister Kiichi Miyazawa said at a regular news conference, "As a general trend, Japan's economy is expected to improve despite fluctuations."


His comments were echoed by Sakaiya's fresh comments Tuesday, "The decline in October-December GDP is due to a temporary fall in consumer spending in December."


Japanese investors were rumored to be unwinding their large hedge positions against their holdings of dollar-based assets.


Japanese investors were rumored to be unwinding their large hedge positions against their holdings of dollar-based assets.


Meanwhile U.S. funds were increasing their hedge ratios against their Japanese stock holdings given the yen's fall, dealers said.


The euro found some support Tuesday from the Organization for Economic Cooperation and Development's chief economist, Ignazio Visco, who said European growth was picking up consistently and could reach 3 percent, "or maybe a bit more," in 2000.