Dollar falls to 15-month low vs yen as markets re-think BoJ rate cut

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The dollar fell to a 15-month low against the yen on Monday as a renewed slide in oil prices and doubts about the effectiveness of the Bank of Japan's negative interest-rate policy drove investors back into the safe-haven currency.

After gaining overnight, crude oil futures again fell, weighing on investor confidence and sapping risk appetite.

The surprise announcement on Jan. 29 that the BoJ was cutting its interest rate to minus 0.1 percent on certain deposits sent the dollar up as much as 2 percent. But markets have since reconsidered, with investors now buying the yen and selling the dollar.

Imposing negative rates was expected to weaken the yen as investors would essentially have to pay to hold money with Japan's central bank. But the small scale of the policy, only affecting certain deposits, and continued fears of a global economic slowdown have overpowered the bank's action.

Monday's moves chased the dollar to its lowest against the yen since mid-November 2014.

"A bit of it is positioning," said Charles St-Arnaud, senior strategist and economist at Nomura Securities International in London.

"They still believe that negative rates are the right policy for (the BoJ), but the market is starting to question the usefulness of the policy and how much of an impact it will have."

Because of its low interest rate, the yen is often used to fund trades of more risky assets. In times of turmoil, investors unwind those bets and buy the Japanese currency.

The dollar was last down .91 percent to 115.758 yen.

The euro also posted gains against the dollar, rising 0.5 percent to touch a session high of $1.1215.

The dollar index, which weighs the dollar against six major world currencies, fell 0.34 percent to 96.70.

The dollar has trended down in line with drops in oil and U.S. stock prices this year. The S&P 500 fell more than 3 percent during the day and is down more than 9 percent so far this year.

Crude futures dipped around 3 percent on Monday, a third straight session of losses, and fell below $30 a barrel.

"The dollar was rising as asset prices were rising, in a risk-on environment," said Axel Merk, president and portfolio manager at Merk Hard Currency Fund in Palo Alto, California. "So it shouldn't be too surprising that the dollar is not the so-called safe haven when asset prices are coming down."