The Dollar plunged to its lowest level in ten weeks against JPY at 94.81, while the Asian stock markets experienced one of its worst one-day down falls. All the Asian markets ended in red territory with the Japanese Nikkei 500 index falling as much as 5.3 %. Tumbling Japanese shares accelerated the fall of the Dollar, as Nikkei investors continued to unwind earlier hedges against a weaker Yen. The Dollar has lost 8.6 % since hitting a four year high of 103.74 on May 22.
The latest developments demonstrate the gamble involved in the Central Bank’s monetary easing. Investors have snapped up Japanese shares between mid-November and May, as a weaker Yen promised to fatten export revenues. Now a stronger Yen threatens to do the opposite, leading to further sell-offs in the Nikkei. The tumults in Asia come on top of uncertainty whether the U.S. Federal Reserve (FED) will pare back its stimulus program buying bonds and treasury bills. Japanese bond selling is adding to the pressure on the currency.
The fall in Asian shares followed a weak session in New York. The Dow Jones Industrial was down 0.84 %, while the technology heavy Nasdaq lost 1.06. The dollar lost 0.3 % against a basket of currencies, DXY, ending at 80.741 after falling below 80.651, a level not seen since February. The dollar has lost 4 % since its three-year high on May 25. Adjustments in overextended long USD positions rather than a changing perception of U.S. growth and Fed outlook seems to be behind the weaker dollar.
The weakness in the dollar saw the euro climb to a near four-month high of 1.3370. The EUR/USD is now trading at 1.3356. It is difficult to explain the stronger euro, taking the eurozone recession into account. Recent polls show, however, that a majority of analysts believe that ECB will keep the interest rate at its present level. Optimists are also suggesting that the eurozone will return to modest growth later this year.
The latest developments demonstrate the gamble involved in the Central Bank’s monetary easing. Investors have snapped up Japanese shares between mid-November and May, as a weaker Yen promised to fatten export revenues. Now a stronger Yen threatens to do the opposite, leading to further sell-offs in the Nikkei. The tumults in Asia come on top of uncertainty whether the U.S. Federal Reserve (FED) will pare back its stimulus program buying bonds and treasury bills. Japanese bond selling is adding to the pressure on the currency.
The fall in Asian shares followed a weak session in New York. The Dow Jones Industrial was down 0.84 %, while the technology heavy Nasdaq lost 1.06. The dollar lost 0.3 % against a basket of currencies, DXY, ending at 80.741 after falling below 80.651, a level not seen since February. The dollar has lost 4 % since its three-year high on May 25. Adjustments in overextended long USD positions rather than a changing perception of U.S. growth and Fed outlook seems to be behind the weaker dollar.
The weakness in the dollar saw the euro climb to a near four-month high of 1.3370. The EUR/USD is now trading at 1.3356. It is difficult to explain the stronger euro, taking the eurozone recession into account. Recent polls show, however, that a majority of analysts believe that ECB will keep the interest rate at its present level. Optimists are also suggesting that the eurozone will return to modest growth later this year.