The dollar traded 0.1 percent from the highest in 3 1/2 years versus the yen on optimism an improving labor market will compel the Federal Reserve to slow stimulus even as Japan pledges to extend easing policies.
Demand for the dollar against Japan’s currency was supported before a report forecast to show U.S. employers added more jobs in February. The yen is set to decline this week against all of its 16 major peers as data showed Japan had a current account deficit for a third-straight month, damping the currency’s value as a haven.
“The greater the momentum in the U.S. economy, the sooner the Fed will taper off QE and the higher the U.S. yields will rise,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. (WBC) in Sydney, referring to the Fed’s asset purchase program known as quantitative easing. “Dollar-yen is a preferred tool for dollar bulls at the moment.”
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