Dollar drops vs yen after BoJ head says currency 'very weak'


The dollar slipped to two-week lows against the yen on Wednesday after Japan's chief central banker said the yen was "very weak" and unlikely to fall further, prompting investors to trim huge bets against the Japanese currency.

The dollar eased broadly and also fell against the euro, which benefited from a rise in benchmark German 10-year bund yields to more than 1 percent for the first time since September.

Bank of Japan Governor Haruhiko Kuroda, speaking to a Japanese lower house financial affairs committee, rescued the yen from close to last week's 13-year trough of 125.86 per dollar to a high of 122.47 yen.

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Kuroda said the dollar may not necessarily rise versus the yen if the Federal Reserve raises interest rates as traders may have already priced the possibility of a rate hike into the market.

Analysts said the comments from Kuroda may slow further declines in the yen and suggested Japan may have started the long process of preparing the market for a time when its economy will need less monetary stimulus.

"If the Bank of Japan does not feel the yen should weaken further, that should reduce expectations for policy easing," said currency strategist Brian Daingerfield at RBS Securities in Stamford, Connecticut.

The dollar last stood at 122.74 yen, off 1.32 percent, and was down 0.26 percent against the euro at $1.1315.

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Hit by the yen's advance and rallying commodity currencies, the dollar slipped to a three-week low against a basket of major currencies of 94.322 and was last off 0.55 percent.

Sterling rose about 1 percent against the dollar.

As oil prices jumped on a report that U.S. oil production was leveling off after years of sharp increases, commodity currencies such as the Canadian and Australian dollars soared by over 1 percent against their U.S. counterpart.

The Canadian dollar hit a three-week high against the U.S. dollar of C$1.2217, before trading at C$1.227. The Australian dollar also rose as much as 1 percent to $0.7785 before trading at $0.7757.

U.S. crude inventories fell by 6.8 million barrels.