Dollar tumbles to fresh 15-year low against yen

Date: 10/7/2010

TOKYO (AFP) – The dollar tumbled to a fresh 15–year low at 82.22 against the yen in Tokyo trading hours on Thursday on persistent fears over the US economic outlook.

The dollar fell from 82.87 in earlier trade to well below the level at which Japan last month carried out its first currency market intervention since 2004 to weaken the yen and protect an export–led recovery.

It later strengthened back to the mid 82–yen level.

The markets increasingly expect the US Federal Reserve to pump more money into the system to boost the flagging economy, even if doing so weakens the dollar and risks fanning inflation.

"The basic trend is dollar selling on the expected credit easing... The market is now sensitive to any negative news on the US economy," said Yasuyuki Takeuchi, dealer at Mitsubishi UFJ Trust and Banking.

The Australian dollar on Thursday surged to an all time high of around 99.00 US cents, traders said, outstripping the record of 98.49 since it was allowed to float in December 1983.

The euro was trading close the key 1.40 dollar level, at around 1.3983.

"A lot of the trading community thinks this has further to go," Daragh Maher, a senior currencies analyst at Credit Agricole in London told Dow Jones Newswires.

The greenback has been pressured after a report from payrolls firm ADP showed an unexpected drop in private sector jobs in September, highlighting fears about the lagging economic recovery.

The data added to worries that a closely watched government survey on non–farm payrolls for September due Friday may also indicate weakness.

The markets increasingly expect the US Federal Reserve to pump more money into the system to boost the flagging economy, even if doing so weakens the dollar and risks fanning inflation.

Tokyo has also repeatedly warned it is ready to step into the markets again, with Prime Minister Naoto Kan threatening further "decisive" steps if necessary on Thursday.

The yen's continued strength follows moves by the Bank of Japan on Tuesday to adopt a near zero–rate policy and new pump–priming measures in a bid to spur growth, beat deflation and address the impact of the surging yen on the economy.

The strong yen has hurt Japan's exporters, making their goods more expensive and eroding overseas profits when repatriated. Exports expanded at their slowest pace this year in August, with falling demand adding to their woes.

A strong domestic currency also makes imports cheaper, helping prolong a damaging deflationary cycle where consumers hold off on purchases in the hope of further price drops, clouding future corporate investment


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