Recasts, adds comments and background
By Stefano Rebaudo and Rae Wee
April 25 (Reuters) –The yen hit a fresh 34-year low versus the dollar and a 16-year low against the euro on Thursday as investors expect a Bank of Japan policy meeting that ends on Friday not to be hawkish enough to support the Japanese currency.
A day earlier, the buoyant dollar broke above the 155 yen level for the first time since 1990 after having traded in a tight range over several days.
On Thursday, the greenback rose to a 34-year high of 155.74 yen JPY=EBS and was last 0.2% higher at 155.62. The euro hit a 16-year high of 166.98 EURJPY= and was last up 0.35% at 166.77.
The 155 yen level has been seen by some market participants as a line in the sand that will prompt the Tokyo authorities to take action.
“If they (Japanese authorities) don’t step in, the breach of the 155 level can attract speculative flows as markets expect intervention,” said Athanasios Vamvakidis, global head of G10 forex strategy at BofA.
“If they buy yen, pressures can still arise because many investors are waiting for intervention to sell the Japanese currency,” he added, arguing that the yen could reach 160 even if there is intervention.
BOJ Governor Kazuo Ueda is expected to be mindful of an episode in 2022, when his predecessor’s dovish remarks triggered a yen plunge that forced Tokyo to intervene to prop up the currency.
However, the prospect of Japanese rates staying low for an extended period and expectations for a delayed start to US rate cuts have continued to push down the yen.
“We expect the BOJ meeting to deliver a marginally hawkish hold outcome,” said Carl Ang, fixed income research analyst at MFS Investment Management.
“Expectations of gradual policy tightening and a low terminal policy rate make it difficult for the yen to appreciate significantly, even if at historically depressed levels.”
The dollar was, however, nursing some losses versus other currencies after a slight tumble earlier in the week following upbeat business activity data in the euro zone duck the UK sent the euro and sterling higher.
The euro EUR=EBS last gained 0.15% to $1.0712, edging slightly away from an over one-week high hit on Wednesday, while sterling GBP=D3 rose 0.2% to $1.2493.
German consumer sentiment is set to rise in May on the back of households’ brighter income expectations, a survey showed.
The dollar dipped 0.1% to 105.69 against a basket of currencies =USDalthough it pulled away from an almost two-week low hit in the previous session.
Investors await US economic data later in the session with analysts flagging that there will be a lot of attention on first quarter US core gross domestic product (GDP) price deflator, which can provide indications for Friday’s release of the Personal Consumption Expenditure (PCE) price index — the Federal Reserve’s preferred inflation gauge.
“Today’s first quarter core PCE deflator could be quite a market mover,” said Chris Turner, global head of markets and regional head of research at ING.
“Long dollars is quite a crowded trade, and a fairly sharp sell-off in the dollar earlier this week on the back of the soft US PMI readings served as a reminder that long dollar positions are not bulletproof,” he added.
Trading in Asia was thin with Australian markets closed for a holiday.
The Aussie AUD=D3 tacked on 0.26% to $0.6514, buoyed by receding bets of rate cuts from the Reserve Bank of Australia (RBA) this year after the country’s consumer price inflation slowed less than expected in the first quarter. 0#RBAWATCH
The New Zealand dollar NZD=D3 gained 0.3% to $0.5954.
Reporting by Stefano Rebaudo and Rae Wee; Editing by Shri Navaratnam, Christian Schmollinger and Edwina Gibbs
