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Dollar on course for 100 yen after G20

Dollar on course for 100 yen after G20

The yen slipped against the dollar after the Group of 20 countries refrained from criticizing Japan's reflationary policies. The dollar last stood at 99.71 yen, up 0.2 percent on the day. It had earlier climbed to as high as 99.90 yen which was within striking distance of a four-year high of 99.95 set on April 11 and the 100 level, where option barriers are cited to be lined up.

A break there could trigger stop-loss buying, which could take the pair up to 101.45 yen, the April 2009 high which could act as near-term resistance. Reported large option expiries at 100 will keep the currency pinned to that level.

Data last Friday showed currency speculators raised their bets against the yen in the week ended April 16, while lifting positions in favor of the U.S. dollar.

The Bank of Japan governor Haruhiko Kuroda reiterated on Monday that the G20 accepted that Japan's radical easing policy was aimed at beating deflation and not at weakening the currency.

"Japannot only escaped criticism, but on the contrary won praise as a country that was fulfilling its global obligations...," said Marshall Gittler, head of global FX strategy at IronFX.

"That is in effect the green light for the BoJ's easing, which we expect will push USD/JPY through the magic 100 number in the not-too-distant future - perhaps as early as today."

Some analysts however cautioned that the pair might face some resistance before the 100 mark ahead of a Bank of Japan meeting on Friday.

"Dollar/yen hitting 100 is going to be a case of 'when' rather than 'if'," said Jeremy Stretch head of currency strategy, at CIBC. "The level will probably go but then we need to look at the durability of the move particularly as we wait for the Bank of Japan at the end of the week."

The yen has weakened 23 percent against the dollar since mid-November, when Shinzo Abe, who became Prime Minister in December, promised bold monetary and fiscal expansionary policies during his election campaign.

The BOJ's sweeping monetary expansion unveiled earlier this month, which aims to inject $1.4 trillion into the economy in less than two years, has given fresh momentum to yen weakness.

Many market players expect the BOJ's massive bond buying to force real-money Japanese investors such as life insurers to shift more funds to higher-yielding foreign bonds.

"Japanese real money investors are expected to announce further details of their investment intention for the new fiscal year over the coming days; hence, with the G20 support for BoJ policy, we expect the JPY-weakening trend to remain intact," analysts at Morgan Stanley said in a note, although they recommended staying cautious ahead of the BOJ meeting.

The euro also rose against the yen, and was last up 0.2 percent at 130.08 yen,. It was nearing a three-year peak of 131.10 set earlier in the month.

 
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