The dollar fell below ¥87.50 in Tokyo Tuesday, weighed down by position-adjustment sales.
At 5 p.m., the dollar was quoted at ¥87.37-39, down from ¥87.76-77 at the same time Monday. The euro was at $1.3113-3116, up from $1.3033-3037, and at ¥114.58-63, up from ¥114.38-41.
The dollar came under pressure from position adjustment after its recent bull run since late last year, traders said. In addition, some players launched speculative dollar selling to trigger stop-loss sales at around ¥87.50, a brokerage official said.
Against these backgrounds, the greenback fell to around ¥87.20 early in the morning.
The dollar may have been also dampened by a newspaper report that a proposed accord between the Bank of Japan and the government will not say when a 2 percent inflation target should be achieved, an official at a foreign-linked bank said.
Late in the morning, the dollar jumped to around ¥87.80 on purchases triggered by Finance Minister Taro Aso’s remarks about the use of the country’s massive external reserves, traders said.
Aso said Japan will buy part of the bonds to be issued by the European Stability Mechanism, the region’s bailout body, continuously by using the nation’s foreign exchange reserves.
The dollar expanded its loss again in the afternoon. But many market sources said the dollar’s undertone remains strong.
“Buying on dips is likely to come in because many market players have remained unable to buy enough dollars,” said an official of a foreign exchange margin trading service firm.
Considering the rapid pace of the dollar’s rise since last month, there would be no surprise if the unit falls to around ¥85, an analyst at a major Japanese bank said.