Yen rises on safe-haven bids, dollar rebounds

Frank van den Bergh | E+ | Getty Images

A broad decline in commodity and stock prices in major world markets raised the yen on Thursday in a search for low-risk assets prompted by the prospect of prolonged low inflation and negative interest rates.

The yen, which investors prefer in times of market uncertainty, reached a three-year peak against the euro and a five-week high versus the U.S. dollar.

"It's generally a cautious mood today. You have stocks lower and yields lower," said Eric Viloria, currency strategist at Wells Fargo Securities in New York.

German 10-year Bund yield and British 10-year Gilt yields reached record lows at 0.024 percent and 1.222 percent respectively on Thursday, as falling yields put pressure on bank shares and the broader market globally. Oil prices retreated from their highest levels of the year but held above $50 a barrel.

The yen gained 1 percent against the euro at 120.9 yen after hitting 120.29 yen, which was last seen in April 2013. It was last down 0.1 percent versus the dollar at 107 yen after touching 106.24 yen, its strongest since May 4.

The dollar rebounded against other currencies, except for the yen, following the prior day's losses tied to reduced bets on a pending U.S. interest rate increase following last week's disappointing jobs report.

The dollar index, which tracks the greenback against the euro, yen and four other currencies, rebounded from five-week lows set on Wednesday. It was last up 0.4 percent at 93.97.

The greenback's gains were supported by an unexpected drop in domestic jobless claims and a stronger-than-expected rise in wholesale sales in April, soothing some worries about U.S. economic growth decelerating in the second quarter.

Analysts expected the dollar would hold in a narrow range ahead of the Federal Reserve's two-day meeting next week.

"The dollar is still in a consolidation phase. It would continue to do so before next week's Fed meeting," Viloria said.

Interest rates futures implied traders saw nearly no chance the U.S. central bank would raise rates at the upcoming meeting , according to Reuters data.

Overnight, the Reserve Bank of New Zealand left interest rates unchanged at 2.25 percent, citing concerns over rising house prices and emerging inflationary pressures.

RBNZ's move surprised some investors who had expected a rate cut, propelling the New Zealand dollar to its strongest versus its U.S. counterpart in almost a year at $0.7148.