The dollar hit a 27-month high near ¥86 in Tokyo trading Thursday, as new Finance Minister Taro Aso fueled market expectations of a continued weakening of the yen.
At 5 p.m., the U.S. currency was quoted at ¥85.64-64, up from ¥85.35-35 at the same time Wednesday. The euro was at $1.3247-3252, up from $1.3195-3197, and at ¥113.46-49, up from ¥112.66-66.
The dollar briefly advanced above ¥85.80, marking the highest level seen since Sept. 17, 2010. The euro, meanwhile, temporarily rose beyond ¥113.50 for the first time since Aug. 4 last year.
At his inaugural news conference after taking office Wednesday, Aso said the new Liberal Democratic Party-led government will take “effective measures” to deal with the strong yen versus other major currencies.
He also expressed willingness to breach the current ceiling of ¥44 trillion in the annual issuance of government bonds in order to draft a massive supplementary budget for the current fiscal year.
After the administration of Prime Minister Shinzo Abe was launched the same day, “there are persistent hopes that the yen’s strength will be corrected, and even position-adjustment dollar-selling (against the yen) has hardly been seen,” said an official at a major Japanese bank.
As the new government is keeping up pressure on the Bank of Japan to drastically loosen monetary policy, “the dollar is unlikely to fall back until the central bank’s next policy-setting meeting in January,” an official at a foreign-exchange margin-trading service provider said.
Still, caution over the greenback’s recent rapid rally versus the yen is growing among traders.