Speculation over dollar-yen is once again doing the rounds, after the Japanese currency fell to one-month lows against the U.S. dollar, sparking talk that another crack beyond 100 is imminent.
Dollar-yen hovered at 99.68 on Tuesday in Asia's session, after brushing 99.705 in U.S trade overnight, boosted by easing fears over Syria and reports that Japanese policy makers could be set to push through their planned sales tax hike.
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Still, analysts say it's still premature to see a decisive break above the psychologically-important level. According to David Forrester, forex strategist at Macquarie, a sustained move by dollar-yen above 100 hinges on three events.
"We will need to see the VAT [sales tax] increase as scheduled in Japan, the Bank of Japan increasing its asset purchases and U.S. yields head higher. These three factors would ensure a divergence in U.S. and Japanese monetary policy," said Forrester, who has a forecast for dollar-yen to reach 110 by year-end.
The currency pair has crossed the 100-level several times since May, but each time failed to sustain the momentum.
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Speculation over whether Prime Minister Shinzo Abe is having doubts about a scheduled consumption tax hike, broadly seen as an essential part of reducing the country's substantial fiscal deficit, has been a key driver of yen strength in recent times.
This is because the Bank of Japan has said in the past that if it is to push ahead with its aggressive easing program, a move that would lead to yen weakness, it would need to see evidence of real efforts to reduce the fiscal deficit.