The dollar rose to another seven-month high against the yen on Thursday in Asia as Japan's trade deficit, its disputes with China and recent risk-taking appetite in the market greatly reduced the number of yen buyers, traders said.
The greenback rose to ¥82.59 on Thursday, its highest level since April 4. Traders said it has become difficult to find big yen buyers because Japan's exporters are not active in the market at the moment as a result of the nation's continued trade deficits.
Asian central banks have also become less active buyers of Japanese assets compared with a few months earlier as a by-product of the tensions between Beijing and Tokyo over disputed islands in the East China Sea.
Meanwhile, non-Japanese hedge funds have been selling the yen, traders said, acting on aggressive comments on the Bank of Japan from Liberal Democratic Party leader Shinzo Abe, who is tipped by pollsters to become the next prime minister in December. The yen has fallen 1.6% since Monday.
Traders now warn of a short-term pull-back of the dollar, especially heading into the U.S. Thanksgiving day holiday season from Thursday, because the recent dollar gains have been too abrupt. This means investors are likely to want to take profits.
In fact, FX Concepts LLC, the world's largest currency hedge fund, recommends not buying the dollar at all at the current level.
"If the dollar falls to ¥81.50, then get long," said Jonathan Clark, head of research at the fund.
The euro was at $1.2842 from $1.2823 in New York on Wednesday while the Wall Street Journal Dollar Index, which measures the dollar against a basket of currencies, was at from 70.875 from 70.879.
