The yen extended recent gains vis-Ã -vis the U.S. dollar today as the greenback tested bids around the Â¥101.40 level and was capped around the Â¥102.90 level. The pair reached its lowest level since January 2000 and was within a few pips of reaching its lowest level since December 1995. Traders are wondering if current levels will result in yen-selling intervention by Japanese monetary authorities. As expected, Bank of Japanâ€™s Policy Board kept the overnight call rate unchanged at 0.50%. The central bank downgraded its assessment of the economy for March, reporting the pace of global growth is slowing on account of higher energy and materials prices. Outgoing BoJ Governor Fukui reported downside risks, led by the U.S. economy, are growing stronger. He added Investors are now seeking more safe-haven assets, which came about because of the irregular movement of stock market prices and forex market rates. Regarding Japanâ€™s economy, he added While the Japanese economy is likely to slow, chances remain high that it will maintain its steady growth under a stable price environment, as the virtuous cycle of rising production, income and spending remains intact. Concerning the yen, Fukui noted While the stronger yen affects our export competitiveness, we should also assess the impact that a stronger yen could yield on trading conditions, including the impact on the cost of imported energy and materials. The government formally nominated BoJ Deputy Governor Muto to succeed Fukui, who retires on 19 March, and his nomination will be fiercely challenged by opposition political parties. Data released in Japan overnight confirmed that Japanâ€™s foreign exchange reserves reached a record US$ 1.01 trillion overnight. The Nikkei 225 stock index lost 3.27% to close at Â¥12,782.80. Dollar bids are cited around the Â¥101.20 level. The euro weakened vis-Ã -vis the yen as the single currency tested bids around the Â¥156.70 level and was capped around the Â¥158.25 level. The British pound and Swiss franc lost ground vis-Ã -vis the yen as the crosses tested bids around the Â¥204.85 and Â¥99.80 levels, respectively. The Chinese yuan weakened vis-Ã -vis the U.S. dollar as the greenback closed at CNY 7.1110 in the over-the-counter market, up from CNY 7.1059. Peopleâ€™s Bank of China Vice Governor Yi Gang reported the central bank will make the exchange rate regime move to a market-based, floating regime. The flexibility of the exchange rate will increase in the future.
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