The yen climbed yesterday and was on track for its biggest daily percentage gain in more than a week after Japan said it plans to encourage pension funds to increase their holdings of domestic financial assets.
The Japanese yen strengthened 0.38 per cent against the greenback to 161.77 per dollar after reaching 161.27. However, the dollar was still up about 3pc on the week against the yen.
“If you look at the scope or scale of the move, it’s not that impressive — it went from, it was a one yen move, and it’s retraced partially already. So it’s like, all right, when are we gonna talk seriously about the matter?” said Eugene Epstein, head of trading and structured products at Moneycorp in Stamford, Connecticut.
“At this point, it’s still just, it’s an urging, it’s not an official directive, and frankly, they could just be testing the waters ... this is a good step, so let’s actually maybe put something firm here and then see how the markets react further.”
The rally was broad-based, with the euro and British pound down around 0.4pc each against the Japanese currency. Before yesterday’s news, the yen had been holding near 40-year lows, keeping traders on watch for potential intervention by Japanese authorities.
“Macro impulses clearly are pushing towards further Yen weakening, but meaningful repatriation flows – if they occur – could be one of the most credible of several paths that lead to the yen eroding its severe undervaluation,” said Goldman Sachs analysts in a note.
The dollar was roughly unchanged on the day, with the dollar index, which measures the greenback against a basket of currencies, edging up 0.01pc to 100.92.
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