CN: Dollar stalls as yen supported by Japanese PM comments on weak yen effects
The yen was supported from a further decline on Wednesday after Japanese Prime Minister Shinzo Abe reportedly commented about the economic impact of the Japanese currency’s recent weakness.
The dollar slipped 0.3 percent on the day to 108.55 yen after Jiji news service quoted Abe as saying he would carefully watch the impact of the yen’s recent weakness on Japanese regional economies.
Abe’s remarks come just after the yen’s decline to a six-year low of 109.46 yen versus the dollar last Friday, a drop of roughly 7 percent from levels reached in early August.
It is only natural to see these types of comments given how fast the yen has dropped versus the dollar recently, said Jesper Bargmann, head of trading for Nordea Bank in Singapore.
“I think it’ll serve the purpose and maybe slow down the move a little bit,” Bargmann said.
“They’re certainly not, in my opinion, directed to talk the yen stronger, but more directed at the speed of the move,” he added.
The yen has weakened against a broadly stronger dollar as investors speculate that U.S. interest rates would rise much before those in Japan or Europe.
The yen has also been weighed down by speculation that a forthcoming strategy review by Japan’s $1.2 trillion Government Pension Investment Fund (GPIF), which is drawing up plans to increase the weighting of domestic stocks in its portfolio, may also result in an increase in its allocation toward overseas assets.
Abe’s comments are probably aimed at trying to avoid any criticism related to the yen’s weakness, said Mitul Kotecha, head of FX strategy, Asia-Pacific for Barclays in Singapore.
“But ultimately, I don’t think the trend or the tone will change. It appears to me that Japanese officials would still prefer to see yen weakening as long as it’s a gradual drop in the currency,” Kotecha added.
