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Dollar retreats from seven-year high vs yen as Japan retrogression hits Nikkei

TOKYO (Reuters) – The dollar swung extravagantly opposite a yen on Monday, primarily spiking to a seven-year high after information showed Japan’s economy suddenly slipped into retrogression before pulling down as a grave mercantile news sent Tokyo bonds tumbling.

Data on Monday showed Japan’s economy shrank an annualized 1.6 percent in July-September, confounding expectations for a medium miscarry and solidifying a perspective premier Shinzo Abe will call a snap choosing and check a second sales taxation travel subsequent year.

The dollar jumped to a new seven-year high of 117.06 yen JPY= in a knee-jerk greeting to a GDP numbers though pulled behind to 115.50 yen JPY=, down 0.7 percent on a day, as Tokyo’s Nikkei .N225 slid 2.6 percent.

“Dollar/yen has been relocating recently in tighten attribute with (Japanese) equities so a Nikkei’s tumble knocked a span from a highs,” pronounced Masafumi Yamamoto, a marketplace strategist during Praevidential Strategy in Tokyo.

“The GDP information was so suddenly diseased and dark many prospects taken for a given,” he said.

Many marketplace participants, quite unfamiliar investors, sell a yen to sidestep their equities positions, so a Japanese banking tends to benefit whenever bonds drop.

The Nikkei had rallied to a seven-high arise final week, helped by conjecture of a unpopular taxation travel skeleton being behind and that an Abe win during a snap choosing might outcome in a second turn of reflationary policies.

Abe’s Liberal Democratic Party (LDP) is approaching to keep a infancy in a reduce residence in a eventuality of a snap choosing given a antithesis is divided and weak. But LDP’s support could be eroded by a weakening economy, clouding a domestic picture.

“In further to a impact from a Nikkei’s fall, a probability of a statute bloc losing some seats during a snap choosing and entrance underneath glow from a antithesis in a arise of a bad information is weighing on dollar/yen,” pronounced Shusuke Yamada, arch FX strategist during BOA Merrill Lynch in Tokyo.

“Dollar/yen’s arise to a 116 and 117 levels was formed on a gentle LDP choosing win, so that unfolding is entrance underneath review,” he said.

The euro rose 0.3 percent to $1.2556 EUR= as a dollar pulled behind from a highs opposite a yen.

The euro had already posted medium gains opposite a dollar overnight as Treasury yields rose after a member of a Thomson Reuters/University of Michigan view index showed a decrease in Americans’ expectations for long-term inflation.

The dollar index, sign of a greenback’s strength opposite a basket of pivotal currencies, fell 0.3 percent to 87.304 .DXY, bark divided from an intraday high of 87.626 strike early in a Asian session.

As a greenback slid broadly a Australian dollar gained 0.4 percent to $0.8779 AUD=D4.

The Swiss franc traded nearby EURCHF= a 26-month high of 1.2011 opposite a euro, circumference ever closer to a Swiss National Bank’s three-year-old top of 1.20 francs per euro.

(Editing by Shri Navaratnam)

Article source: http://www.reuters.com/article/2014/11/17/us-markets-forex-idUSKCN0J102320141117

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