The Japanese yen soared to an 18-month high against a weak US dollar on Tuesday, extending gains which have undermined the attempts of Japanese officials to reflate the stagnant economy.
The yen also rallied sharply against the Aussie, with the yen up by 1.7 percent after the Reserve Bank of Australia lowered interest rates to record lows.
The Japanese yen has now climbed over 12 percent against the greenback this 2016, extending gains after the Bank of Japan kept monetary stimulus unchanged during the previous week.
According to reports, the Japanese Prime Minister Mr. Shinzo Abe and French President Mr. Francois Hollande had described the sudden moves in forex rates as undesirable.
The Japanese Prime Minister will also travel to Germany and Italy in a European tour. Some are under the belief that Abe will try to set the stage for potential intervention in currency markets, as the Asian country prepares to host a G7 meeting later this May.
Previous G7 meetings’ attendees do not agree with interventions, and Japan is sensitive to criticism that it is trying to fix up a weaker yen through loose monetary policy.
However, market players stated that a great increase towards 100 yen per dollar could trigger action, even during the Golden Week holidays of Japan.
The greenback has been on the defensive with the Federal Reserve seeing that there is no need to rush in hiking interest rates. On Tuesday, the US dollar index slumped as far as 91.919—the lowest since the month of January last year.
According to Bank of Tokyo Mitsubishi currency strategist Mr. Lee Hardman, "Broad-based dollar weakness is reinforcing the problem of a stronger yen for Japanese policymakers."
On Tuesday, the US dollar dipped to 105.50 yen—the lowest since October 2014—as concerns regarding subdued inflation and sluggish global growth resurfaced and drove market players to the safety of low-yielding, liquid currencies.
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