The USD/JPY cross fell to a fresh low of 83.34 as risk-averse investors piled into the "safe-haven" currency Wednesday pushing it to a new 15-year high against the greenback. The dollar also slid on speculation the Federal Reserve’s Beige Book business survey will add to evidence the U.S. economic recovery is stalling.
There are lingering worries the U.S. economic recovery may be tepid, analysts said, and that has a negative effect on the dollar. The yen is being bought, partly because Japan has a Current Account surplus (the difference between a nation's exports of goods, services and transfers, and its imports). Japan’s surplus expanded 26% from a year earlier to 1.68 trillion yen ($20 billion), the Ministry of Finance said, surpassing the 1.53 trillion yen surplus forecast by economists.
Gains in the yen were tempered, however, after Japan’s Finance Minister said he is prepared to take bold steps on currencies if necessary. But there was still skepticism among market players as to whether intervention would actually happen. Japan has not intervened in the currency market since March 2004, after spending 35 trillion yen ($420 billion) over a 15-month period to support an economic recovery.
Since the euro looks unstable again, and the dollar might weaken further ahead of the mid-term election, it leaves the Japanese yen as the only currency to buy. And especially after the Bank of Japan’s (BOJ) governor made only vague comments about the yen, the USD/JPY should face a further weakness with 83.3 and 83.05 targets in sight.
Disclosure: no positions