The Japanese yen dropped against its major counterparts on Friday, amid growing demand for higher-yielding assets, spurred by speculation that global economic growth will be robust.
Japan’s currency fell to a near 10-month low of 118.67 against the euro in early European trading, while the dollar reached a six-week high of 83.748 yen.
Traders speculate the Bank of Japan (BoJ) will keep the interest rates on hold following a devastating earthquake that had hit the country on March 11, while the European Central Bank (ECB) signaled to increase the key rates in April.
Further, yen could also be pressurized from a strong U.S. jobs report due on Friday, which is forecasted to add 190,000 jobs in March.
A strong payrolls number would be reflected in the dollar/yen and it could rise to 84.50 in the short term, Reuters reported, quoting Simon Derrick, head of currency research at Bank of New York Mellon.
A strong US non-farm payroll data is expected to show that economic recovery in the country is on track, leading to further widening of yield differentials between dollar and yen assets.
Also, a U.S. Federal Reserve made hawkish comments on Thursday, raising expectations that Fed will hike interest rates before BoJ.
We expect to see prolonged yen weakness due to loose monetary and fiscal policy in Japan,” Derrick said.
The yen surged to an all-time high of 76.25 against the US dollar on March 17., as speculation spurred over domestic investors bringing back overseas assets in the wake of disastrous earthquake hitting country.
However, yen tumbled against major currencies after G-7 nations intervened in the currency markets to weaken the yen’s surge.
BoJ’s Tankan survey on Friday showed that large manufacturers in Japan predict the yen to at 84.20 against the dollar on an average in the year through March 2012.