Yen Strikes Seven-Month Low on the Easing Concerns of BOJ

yen dropped to a 7-month low against the dollar on worries about further financial easing in Japan, while increased probabilities of a resolution to the United States ‘financial cliff’  assisted the euro and riskier currencies.

The euro was also hoisted by the visions of the finance ministers of the euro zone consenting with the International Monetary Fund (IMF) on a 2-year funding contract for Greece.

The dollar was stable at 81.28 yen, having climbed as high as 81.59 yen on EBS trading platform, its maximum level after April 25.

The investors have discarded the yen after elections were called for December 16 and the opposition Liberal Democratic Party (LDP) leader called on the Bank of Japan (BOJ) to record ‘unlimited yen’ and set the rates at zero or even lower.

However, investors were aware of shoving it even lower before a BOJ policy statement on Tuesday, wherein most of the analysts anticipate it will stop from proclaiming extra financial easing.

BMO Capital Markets’ foreign exchange strategy head, Audrey Childe-Freeman told that continued questions and talk over the possible changes for BOJ has weighed on yen. He does not feel that the BOJ will announce any big changes during this meeting.

Traders referred to stop loss buy orders at 81.75 and 82.00 yen, with alternative barriers posted at these levels also. But still, an 81.25 yen options expiry due afterwards in the day may retain the dollar moving near that level.

The euro climbed 0.2% to $1.2771, regaining from a 2 ½ month low of $1.2661 attained last week, though it stayed fixed under chart resistance at $1.2807, its 200-day moving average.

On Sunday, Joerg Asmussen, the policymaker of the European Central Bank told that the euro zone should consent next week on 2 years sponsoring for Greece, while Wolfgang Schaeuble (Finance Minister of Germany) told that he was banking on a contract.

However, the officials of the euro zone, who are to meet on Tuesday, may face protests from the IMF, which needs a permanent solution to the debt problems of Greece.

The analysts working at Morgan Stanley suggested purchasing the euro at $1.2730, with the aim of $1.33 and a stop at $1.2650.

They told that they anticipated development towards a compromise on the next funds payment for Greece, which should provide support for the euro.