The yen slid to its lowest level in more than 2-1/2 years against both the dollar and the euro on Friday, pressured by expectations of more aggressive monetary easing from the Bank of Japan.
Supported by diminishing worries about Europe’s debt crisis, the euro hit a 14-month high against the dollar, gaining added momentum after breaching an option barrier.
The dollar rose 0.6 percent to 92.17 yen, having hit a high of 92.27 yen earlier on trading platform EBS, the greenback’s strongest level since June 2010.
The euro jumped 0.9 percent to 125.53 yen. The single currency scaled a peak of 125.75 yen, its highest level versus the Japanese currency since April 2010.
The yen’s drop accelerated as market players took aim at and breached option barriers at levels such as 125.00 yen versus the euro and 92.00 yen against the dollar, traders said.
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Selling the yen has become a one-way bet with Japanese Prime Minister Shinzo Abe heaping relentless pressure on the BOJ to ease monetary policy aggressively to jolt the economy out of a decade long malaise.
Analysts expect further weakness in the yen with some expecting the dollar to rise to 100 yen in time.
“We expect sustained weakness in the yen because of Abe’s aggressive policy changes,” Michael Sneyd, analyst at BNP Paribas, wrote in a client note. He sees the dollar reaching 95 yen in the first quarter of this year.
In contrast, worries about Europe’s debt crisis are slowly easing and the European Central Bank’s relatively more upbeat outlook for the region have made the euro more attractive against the yen and dollar.
“Big Sentiment Change”
The euro rose 0.3 percent to $ 1.3619. The single currency climbed to $ 1.3634 earlier on Friday, its strongest level against the dollar since November 2011.
“Euro goes up every day …. It’s all just a continuation of what we’ve been seeing lately. Same kind of portfolio shift, the sentiment is positive,” said Jesper Bargmann, Asia head of G11 spot FX for RBS in Singapore.
“Money is going back into Europe… So we’re seeing the longer-term investors leaving the safe haven bets, particularly the yen, but we’ve seen it in sterling as well, we’ve seen it in Swiss franc,” Bargmann said.
“It’s a big sentiment change more than anything else,” he added.
The Australian dollar slipped 0.3 percent to $ 1.0399, coming under pressure after China’s official measure of manufacturing activity surprised on the downside.
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HSBC’s reading of Chinese manufacturing activity, however, hit a two-year high.
All eyes are now on U.S. jobs data due later on Friday.
David Song, currency analyst at DailyFX, said an upbeat reading could add to the case for the Federal Reserve to slowly move away from its easing cycle.
“We may see a growing number of Fed officials scale back their willingness to preserve the highly accommodative policy stance for a ‘considerable time’ as the world’s largest economy gets on a more sustainable path,” he said.