PETALING JAYA: Analysts are generally bearish on the yen while an economist expects its movement to remain erratic.
Hitting an intra-day low of 117.67 to the dollar yesterday from a three-month high of 115.16 on Monday, the yen has moved fairly in tandem with the Kuala Lumpur Composite Index this week, said MIMB Investment Bank research manager (charts) Lee Cheng Hooi.
Singapore-based Citigroup Asia Pacific forex/interest rate strategist Sim Moh Seong said: “The yen strength that we saw in previous days was caused by a rise in risk aversion caused by the stock market sell-off.
“When the risk aversion subsides, fundamentals point to renewed weakness of the yen.”
Lee concurred with Sim, saying that the yen was still “within a downtrend”.
Lee forecasts two levels at which the currency would be “capped” and could see retracement – 117.85 and 118.68.
“Our outlook is for possibly one or two weeks,” he said, adding that “at those levels, Japanese exporters may begin selling (the dollar).”
Kenanga Investment Bank economist Wan Suhaimi Saidi said: “The yen is rather volatile at the moment and I expect it to be erratic.”
Having made its impact, the yen carry trade won’t be the main problem for the equity market anymore, Suhaimi said.
Rather, he sees rate tightening by the Bank of Japan (BoJ) and other central banks as a more important factor.
“All eyes are on BoJ governor Toshihiko Fukui and whether he is planning more aggressive or timid tightening of interest rates.
“A 0.25% increase in rates every six months doesn’t have much impact, but an increase of 0.25% every month would really make people stand up and take notice,” he said.
Bloomberg reported that as at 5pm, the yen slid against all but one of the world’s 16 most-actively traded currencies as equities this week rallied from a slump that erased more than US$2.4tril from the value of global stock markets.
The yen has slipped the most against the New Zealand dollar as New Zealand’s central bank raised its benchmark interest rate to 7.5% on Thursday.
The yen is also headed for a losing week against the euro after the European Central Bank raised its refinancing rate for the seventh time since December 2005 to 3.75% on Thursday, Bloomberg said.
The yen had also fallen to 154.41 per euro from 154.10 a week ago. It slipped to 80.86 per New Zealand dollar from 80.39 a week ago.
The BoJ’s key overnight lending rate is 0.5%. The US Federal Reserve and the Bank of England’s rates are 5.25%.
Bank Negara’s monetary policy committee, which met late last month, has kept the key overnight policy rate at 3.5%.