Yen surges against dollar on renewed worries
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The yen firmed against the dollar in Asian trade on Wednesday, as rekindled worries about the eurozone debt crisis sent risk-averse investors flocking to the safe-haven currency.
The dollar slipped to 80.75 yen in Wednesday Tokyo trade, from 81.49 yen in New York on Tuesday.
The euro also softened to $1.3074 in Tokyo from $1.3084 in New York, but firmed to 105.60 yen from 105.49. However, the euro is still well down from the levels near 107 yen in Asia on Tuesday.
The government tried to play down the significance of the latest market trend, signalling that the yen's recent rise has yet to cause Tokyo to consider dramatic counter steps, such as yen-selling interventions.
"I won't let (every rise and fall in the foreign exchange markets) dictate my mood," Finance Minister Jun Azumi told reporters.
The slow recovery of the US economy, the lingering eurozone debt problem and decelerating growth in China all worked to fuel pessimism, amid a lack of fresh news, said Emma Lawson, strategist at National Australia Bank.
Investors are gauging both the possibility of further easing measures in the United States, which would hurt the dollar, and the euro's downside risks, with rises in Spanish bond yields fuelling worries, she said.
"This balancing act is still playing out," she said in a note to clients.
"If the view on QE3 (the third round of quantitative easing by the Federal Reserve Bank) diminishes, then euro/dollar likely breaks below 1.30 more decisively again," she said.
While Lawson said she believed QE3 was unlikely, others awaited comment from Fed officials who were slated to speak later on Wednesday.
Any bearish remarks could induce a selloff in the dollar amid growing speculation about monetary easing, said Sumino Kamei, senior analyst at the Bank of Tokyo-Mitsubishi UFJ.
"If Boston Fed President (Eric Rosengren) delivers dovish remarks, that could become a dollar-sell factor," he said in a note.
But lingering expectations of further easing steps by the Bank of Japan and renewed concerns about the European debt problem could lend some support to the dollar, she added.
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