* Dollar/yen slips below key retracement level
* Eurogroup’s Juncker says euro is ‘dangerously high’
* Euro pulls back from 11-mth high vs dollar, falls vs yen
By Hideyuki Sano
TOKYO, Jan 16 (Reuters) – The yen rose for a second day on
Wednesday after a Japanese cabinet minister warned of the
potential harm of excessive yen weakness, while the euro slipped
after a European official complained about its recent gains.
Traders unwound bearish positions in the Japanese currency
after Japan’s Economics Minister Akira Amari cautioned on
Tuesday that excessive yen weakness could boost import prices,
hurting people’s livelihood.
“The yen’s fall has been quite fast so far. If its fall is
too fast, its reversal could be fast as well. It seems to me
that Amari’s comments were intentional efforts to curb
overheating in the market,” said Kimihiko Tomita, head of forex
at State Street in Tokyo.
The dollar fell 0.8 percent to 88.08 yen, dropping
below key support at 88.25, the 50 percent retracement of its
Jan. 9-14 rally from 86.825 to a 2-1/2-year high of 89.67, as
well as tenkan line on the daily Ichimoku chart.
Many market players think the yen’s latest rebound is a
small correction in a long-term downtrend, which started late
last year on expectations that the Bank of Japan will be forced
to take bold action to reflate a sluggish economy.
New Prime Minister Shinzo Abe has been very vocal about
getting the BOJ to tackle deflation once and for all, calling
for a two percent inflation target. The BOJ is widely expected
to do just that at its policy meeting on Jan 21-22.
But some traders say there could be
buy-on-rumour-sell-on-fact type of selling in dollar/yen after
that meeting.
“I haven’t come across anyone who seriously thinks that the
BOJ can boost inflation to two percent,” said Takako Masai, head
of forex at Shinsei Bank, adding that the BOJ meeting could
offer a good chance to exit bearish bets on the yen.
The euro fell 1 percent against the yen to 116.95 yen
, as the single currency lost momentum after
Jean-Claude Juncker, the chairman of the euro zone finance
ministers said the euro was “dangerously high”.
The single currency also eased against the dollar, trading
at $1.3280, down 0.2 percent on the day and pulling back
from an 11-month high of $1.3404 set on Monday.
Traders said Juncker’s comments simply gave investors an
excuse to cash in on recent gains and did not necessarily
represent a reversal in its uptrend.
The euro had rallied some 3 percent against the dollar in
the past few sessions after the European Central Bank (ECB)
sounded more upbeat about the region’s recovery.
With most of the attention focused on the yen as well as the
euro, the dollar’s moves against other currencies were mild.
The Australian dollar slipped 0.1 percent to $1.0552
, still within striking distance of a 4-month peak near
$1.0600 set last week.
