Yen Erases Drop Versus Dollar After Aso Comments, Euro Advances

The yen erased a decline that brought it the brink of 100 per dollar for the first time in four years after Japanese Finance Minister Taro Aso said excessive currency gains are being corrected.

The yen plunged 6.5 percent in the previous three days after the Bank of Japan (8301) took unprecedented monetary easing steps, with a technical indicator signaling the decline may be poised to reverse. The euro rose to the highest in more than three weeks against the dollar after Federal Reserve Chairman Ben S. Bernanke said economic conditions are far from where he would like them to be.

The yen rose 0.2 percent to 99.14 against the dollar as of 10:02 a.m. in Tokyo, after earlier reaching 99.66, the lowest since May 2009. The yen fell 0.2 percent to 129.52 versus the euro. Europe’s shared currency gained 0.4 percent to $1.3063 after touching $1.3068, the highest since March 15.

The yen exchange rate is in the process of being corrected, Aso told reporters in Tokyo today. The currency’s weakness is the result of policies to end deflation, he said.

The yen hasn’t been at 100 per dollar since April 2009. The currency’s 14-day relative strength index against the greenback was at 27 yesterday, below the 30 level that some traders see as a sign an assets price has fallen too fast.

BOJ officials led by Governor Haruhiko Kuroda said last week they will boost monthly bond purchases to 7.5 trillion yen ($75 billion) as they set a two-year horizon for their goal of 2 percent inflation. They suspended a cap on some bond holdings and dropped a limit on debt maturities. The central bank’s next policy meeting is on April 26.

The yen has slumped 22 percent in the past six months, the worst performance among 10 developed market currencies tracked by the Bloomberg Correlation Weighted Indexes. The euro climbed 2.7 percent and the dollar gained 1.2 percent.

(Source: Bloomberg)