The yen rallied from the lowest level in more than four years against the dollar as technical indicators signaled its recent decline was too rapid.
The yen touched the weakest since October 2008 yesterday as the U.S. economy showed continued signs of recovery and Treasury yields touched a seven-week high. The euro advanced today, snapping a three-day decline, before data forecast to show German investor confidence rose this month. The Australian and New Zealand dollars climbed as gains in Asian stocks boosted demand for riskier assets.
“The sheer scale of the yen move has given the impression that it’s a one-way bet, and in currency markets there aren’t any one-way bets,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. (WBC) in Sydney. “The arguments for buying the U.S. dollar on the notion of the Fed tapering off QE any time soon are quite thin,” he said, referring to the the Federal Reserve’s program of so-called quantitative easing.
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