Yen slips to 7-year low vs dollar

LONDON: The yen skidded to a new seven- year low against the dollar on Monday, extending a huge sell- off triggered by the Bank of Japan’s surprise decision last week to boost its already massive bond- buying stimulus.

Sellers also targeted the euro, which slipped to a new two- year low against the dollar ahead of a European Central Bank meeting later this week which some think could see further easing measures announced to shore up the eurozone’s flailing economy.

Those gains helped the greenback reach a new four- year high against a basket of major currencies of 87.400, extending gains made last week on the back of a US Federal Reserve policy statement that was less cautious than expected.

The dollar came within a whisker of 113.00 yen, reaching a high not see since December 2007. It last traded at 112.76 yen, up 0.4 percent on the day, having touched 112.985 yen on trading platform EBS in Asian trading.

The greenback soared nearly 3 percent versus the yen on Friday after the BOJ raised its monetary base target to an annual increase of 80 trillion yen from 60- 70 trillion yen and tripled the pace of its buying of risk assets such as exchange traded funds (ETFs) and real estate investment trusts ( REITs).

“The big question is when is dollar/ yen is going to stop,” said Jane Foley, a senior currency strategist at Dutch bank Rabobank in London.

“Part of the answer to that question lies not just with the Bank of Japan, but it lies with the Fed and the US dollar and so it depends how much momentum the dollar can draw.”

The yen could face further speculative selling after the BOJ’s unexpected easing underscored the monetary policy divergence between the BOJ and the US Federal Reserve, said Nobuhiko Akai, head of trading department for the Bank of Tokyo- Mitsubishi UFJ in Singapore.

“Everyone had been expecting a 105- 110 yen trading range for a while, but now that seems to have completely shifted to a 110- 115 yen range,” Akai said.

The BOJ announcement was followed by news that Japan’s $ 1.2 trillion Government Pension Investment Fund will raise its holdings of foreign stocks to 25 percent from 12 percent, a figure that some analysts said was much higher than expected.

In a sign of just how bearish sentiment is against the yen, the struggling euro touched a six- month high of 141.40 yen in Asian trading.

Against the dollar, the euro fell to as low as $ 1.2439, its weakest since August 2012.

It was last trading at $ 1.2491, down 0.3 percent on the day.

Traders suspect the euro will stay on the defensive in the lead up to the European Central Bank policy review on Thursday.

“We’ve had surprises from central banks last week in the form of Riksbank and the Bank of Japan, and pressure is obviously on the ECB,” said Mitul Kotecha, head of FX strategy, AsiaPacific for Barclays in Singapore.

The Riksbank, Sweden’s central bank, last week cut its key interest rate by a bigger than expected 25 basis points to a record low of zero percent to fight persistently low inflation.

The Australian dollar slipped to a two- week low of $ 0.8703 following a weak official survey on China’s manufacturing sector and a surprisingly large fall in Australian building approvals.