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Rising Yen Passes 100 to US Dollar

By HIROYUKI KACHI Updated Aug. 16, 2016 7:10 a.m. ET


Japanese 10,000 yen notes in Tokyo. The yen on Tuesday strengthened past the U.S. dollar. PHOTO: REUTERS

TOKYO—The yen strengthened past 100 to the U.S. dollar on Tuesday for the first time since the U.K.’s vote to leave the European Union, with interest-rate moves in the U.S. and Japan on the minds of investors.

Early evening in Tokyo, the yen appreciated to around ¥99.84 versus the dollar, compared with ¥101.25 late Monday in New York. Traders said thin trading volume and stop-loss orders exaggerated the gain in the Japanese currency, with many in financial markets taking the week off for summer holidays.

“Amid extremely thin volume, selling might have kicked in to intentionally induce stop-loss orders,” further weakening the dollar against the yen, said Yuzo Sakai, manager of FX business promotion at Tokyo Forex & Ueda Harlow. He and other market watchers said there was no particular news trigger for Tuesday’s currency movements.

Investors were watching the direction of interest rates in the U.S. and Japan. Weak retail sales in the U.S. led some investors to take the view that the Federal Reserve might hold off on interest-rate increases. If the Fed did wait, that would be negative for the dollar.

“Investors’ appetite for dollar buying remained low in the wake of downbeat U.S. economic indicators recently. Against that backdrop, I think there were some investors who opted to offload [the dollar] amid weakness in Tokyo stocks,” Mr. Sakai said.

On Tuesday, the benchmark Nikkei Stock Average closed down 1.6% at 16596.51.

Uncertainty about the Bank of Japan’s direction also continues to create instability in Tokyo markets. After the central bank decided on July 29 not to take significant new easing steps beyond an increase in purchases of stock funds, the yen rose because traders believed that the BOJ was unlikely to lower interest rates further. Monetary easing is one of the original “three arrows” in Prime Minister Shinzo Abe’s pro-growth Abenomics policy.

In February, the BOJ introduced a minus 0.1% rate on certain deposits held by commercial banks at the central bank.

“The yen’s strength is accelerating as investors become mindful about the limits of Abenomics,” said Junichi Ishikawa, market analyst at IG Securities.

The yen briefly rose above 100 to the U.S. dollar after the U.K.’s Brexit vote June 23, trading in the 99-yen range on June 24.



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