Yen Dives to 32-Year Low as Relentless Dollar Powers On

Japan’s yen slide continued on Friday as it fell to a 32-year low with the US dollar’s surge showing no signs of abating.

The greenback has been on fire this year as the Federal Reserve has ramped up interest rates in an effort to tame inflation, pulling money back towards the United States. Fears about the global economy have also boosted the safe haven asset.

Yet, the stronger-than-expected inflation data on Thursday counter-intuitively triggered a rally in global stock markets and a fall in the dollar. Analysts suggested short-sellers reversing their positions seemed to have driven the bounce in equities, weighing on the dollar.

But Japan’s battered yen remained under pressure despite the brighter global mood. The dollar rose to a new 32-year high of 147.785 yen on Friday, and was last up 0.34% to 147.705.

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The dollar index was last up 0.35% to 112.97, having fallen 0.6% on Thursday as investors seemingly brushed off data that showed US consumer prices increased more than expected in September.

“Some of the detail perhaps wasn’t as worrying as the particular core [inflation] print suggested, so when the market started to sell off, people began to cover very quickly,” said James Malcolm, head of foreign exchange strategy at UBS.

Last month, Japan intervened to buy yen for the first time since 1998. Investors remained on watch for further intervention after finance minister Shunichi Suzuki on Thursday reiterated the government’s readiness to take action against excessive currency volatility.

Masayuki Kichikawa, chief macro strategist at Sumitomo Mitsui Asset Management, said he thought the yen could still hit 150 per dollar in the near future.

“I don’t think the Ministry of Finance is targeting any specific level or line in the sand,” he said. “What they are saying is they are trying to prevent excessive volatility.”

Reuters with additional editing by Sean O’Meara

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Sean O'Meara

Sean O'Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.