Yen hits high against dollar
THE YEN surged to an all-time record high against the dollar yesterday as fears Japan may be losing its battle to contain a nuclear meltdown saw demand for the currency rocket on expectations that Japanese investors will bring home cash from abroad to help finance reconstruction of the crisis-stricken country.
The dollar plunged by more than five per cent against the yen, falling to a record low of 76.32 yen, breaching a previous record low of 79.75 set on 19 April, 1995.
Strategists said a combination of the repatriation of money by Japanese insurers of money necessary to pay damage claims, investors exiting riskier investments abroad and the end of the fiscal year meaning Japanese companies would be bringing back overseas earnings by the end of March were behind the currency’s biggest rise since World War II.
The yen’s extraordinary rally, which puts further pressure on Japan’s fragile economy by making its goods less competitive, prompted expectations that the Bank of Japan would be forced to intervene by selling yen in the market in a bid to drive the dollar higher.
“It is now a game of chicken between the market and the Bank of Japan over intervention to try and weaken the yen and help the already fragile Japanese export market,” said Jeremy Cook, chief economist at foreign exchange brokers World First.