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The yen reached its strongest level since 1995 versus the dollar as increased risk in Japan of radiation leaks from crippled nuclear power plants boosted speculation investors there will bring home overseas assets.
Japan’s currency gained for the fourth straight day amid speculation the strength of the yen may prompt intervention to weaken it by the Bank of Japan for the first time since September.
“The more macabre headlines you see pertaining to the nuclear reactors, the more speculation you are going to see over repatriation,” said Jessica Hoversen, an analyst at MF Global Holdings Ltd. “I think 80 is a line in the sand for the central bank.”
“There are real concerns that if it’s a disorderly move down in dollar-yen, the BOJ may start to intervene,” said Paresh Upadhyaya at Bank of America Corp.
In an attempt to slow the yen’s 15% appreciation last year, the Bank of Japan sold 2 trillion yen ($25 billion) in September in the nation’s first currency market intervention since 2004.
The euro fell for the first time in four days after Moody’s Investors Service downgraded Portugal’s credit rating, reviving concern about the region’s ability to solve its debt crisis. The company cited the nation’s “less supportive” economic environment and said its outlook remained negative given Portugal’s “subdued growth prospects” and risks that the government won’t be able to implement deficit-reduction plans.
The Swiss franc gained as violence in the Middle East and concern in Japan prompted haven-asset buying. Bahrain closed its stock exchange as clashes between security forces and anti-government protesters intensified.
Concern that violence may spread to neighboring Saudi Arabia, the world’s biggest oil producer, damped demand for higher-yielding assets and increased commodity prices. The Thomson Reuters/Jefferies CRB Index of raw materials rose 1.1% after falling 3.6% yesterday.
EUR/USD tested $1.4000 in Asia, but failed to break above and retreated to $1.3864. Later rate recovered to $1.3970.
GBP/USD printed high on $1.6130 overnight. Decline to $1.6050 was short-lived and rate back to $1.6115 before weakened to $1.5880.
USD/JPY fell to Y76.40 (1995 lows), but intervemtion concerns capped further decline.
SNB rate decision at 08:30 GMT will be the one key EU release.
At 12:30 GMT US Jobless claims report for the week to 12.03 comes, followed by CPI report and Industrial production data at 12:15 GMT.
Philadelphia Fed index is due to come at 14:00 GMT.
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