MW: Yen stabilizes after testing June ‘10 dollar level
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) ) — The beleaguered Japanese yen stabilized Friday after dropping to its lowest level versus the dollar since June 2010 in the wake of a disappointing round of current-account data and another round of fiscal stimulus.
The dollar changed hands at 88.77 yen USDJPY +0.2246% in recent activity, up from ¥88.59 in North American trade late Thursday but down from an intraday high of ¥89.20 on Factset. News reports said the yen traded as high as ¥89.35 on the EBS platform.
Either way, dollar/yen traded at levels last seen in June 2010.
The euro EURJPY +0.2720% traded at ¥117.71, up from ¥117.41, after hitting a level last seen in April 2011.
The primary catalyst came from Japan’s November current-account data, which showed a deficit for the first time in 10 months.
Elsa Lignos, currency strategist at Royal Bank of Canada in London, noted, however, that seasonally-adjusted data showed the current account was in surplus, “making it unreasonable to read too much into the unadjusted data.”
Meanwhile, new Prime Minister Shinzo Abe’s cabinet on Friday approved a fresh stimulus package that includes ¥10.3 trillion ($116 billion) in fresh spending and is aimed at boosting economic growth by 2%.
“The FX market clearly doubts whether Abe’s first major initiative will have any effect apart from further increasing Japanese national debt,” said Lutz Karpowitz, currency strategist at Commerzbank.
The disappointing current-account data has served to increase scrutiny of the national debt, Karpowitz said.
“Even though the [adjusted] current account remains in the black, the surplus is falling unmistakably. Should the current account slide into the minus, Tokyo would be dependent on foreign investors and would probably have to pay higher interest for its gigantic national debt of more than 200% of GDP,” he said.
The dollar index DXY +0.01% , a measure of the greenback against a basket of six major rivals, was up slightly at 79.822, up from 79.793 late Thursday. The WSJ Dollar Index XX:BUXX +0.11% , which measures the currency against a slightly larger basket, rose 0.07 point to 70.61.
The euro EURUSD +0.0381% traded at $1.3259, little changed from $1.3256 late Thursday.
The shared currency surged to a level last seen in September in Thursday’s trade after European Central Bank President Mario Draghi appeared to close the door to a near-term rate cut and talked up signs of returning normalcy in euro-zone financial markets. See: Draghi dashes hopes for ECB rate cut .
The British pound GBPUSD -0.2434% traded at $1.6118, down from $1.6152 late Thursday. The Australian dollar AUDUSD -0.2644% fetched $1.0569, down from $1.0596.
William L. Watts is MarketWatch's European bureau chief, based in Frankfurt. Follow him on Twitter @wlwatts.
