Yen Continues to Slide as Hopes for G7 Action Fade
The yen extended its slump as investors grew more certain finance officials from the world's wealthiest nations will offer no opinion on the currency's broad weakness at their meeting later in the day.
Japan's currency fell against the euro for the fourth straight session and against the dollar for the third day in a row.
The Group of Seven meeting in Essen, Germany, has been the key focus all week for investors, who have sold the yen and other low-yielding currencies in carry trades to buy higher-yielding ones.
European policy-makers are calling for the G7 to tackle the yen's weakness, which potentially hurts their exports by making them more expensive in Japan and in turn makes Japanese exports pricier in Europe.
However, Washington and Tokyo have played down the issue. Most analysts expect the G7 will take no concerted action on the yen, although pre-meeting jitters prompted some brief buying back of the Japanese currency early in Europe.
"Markets have reversed what earlier in the week seemed like" an easy trade: buy the yen, said Joe Francomano, vice president for foreign exchange at Erste Bank in New York.
"What can the G7 do? The G7, other than making an official statement and rattling the cage, can't really do anything, unless they intervene. And I don't think they're going to do that," he added.
The euro was up slightly, recovering from a short, sharp fall earlier in European trade when stop-loss orders were triggered. Traders said the euro's inability to hold gains above 158 yen has limited the currency's near-term upside.
The dollar rose as high as 121.73 yen, a nearly two-week high.
Comments about the yen today from Canadian Finance Minister Jim Flaherty hardly drew a reaction from the market. Flaherty said the yen's weakness is not specifically on the agenda at the G7 meeting, but will come up in separate discussions.
Japanese Finance Minister Koji Omi, meanwhile, offered few hints on what stance he would take on currencies at the meeting. He reiterated on Friday that he was not in a position to comment on the yen and that the currency should reflect economic fundamentals.
Analysts said current interest rate fundamentals dictated a continuation in the carry trade play for now.
"We expect the Bank of Japan to hike (interest rates) once only in Q2, with the Fed on hold and the ECB hiking twice. It's basically a carry trade story," Credit Suisse global FX strategist Marcus Hettinger said.
Elsewhere, the euro was down against the dollar , losing some of the gains made after European Central Bank President Jean-Claude Trichet on Thursday signalled an interest rate hike was likely in March.
The Canadian dollar rose sharply against the U.S. dollar after data showing Canada added 88,900 jobs in January, well above a forecast for 10,000.