Wednesday, 16 Mar 2011

Yen's Rise Lifts Chances of BOJ Intervention

The yen neared a record peak against the U.S. dollar on Wednesday, but analysts say expectations Japan will intervene to weaken the currency if it gets much stronger may provide a good opportunity to buy the greenback.

The dollar hit a 4-month low of 79.77 yen after a European official said Japanese efforts to contain radiation levels from a damaged nuclear power plant were "effectively out of control." That added to the steady yen buying seen since last week's earthquake, which has traders bracing for investors to sell overseas assets to pay for repairs at home.

Market participants, however, expect Japan to try to lean against any further appreciation by selling yen in the market and driving the greenback higher. A stronger yen would make Japanese goods less competitive and put further pressure on the fragile economy, mired in a decades-long bout of deflation.