The dollar temporarily rose above ¥97 for the first time in over 3½ years in Tokyo trading Friday, drawing continued support from the Bank of Japan’s aggressive monetary easing measures announced the previous day.
But the greenback trimmed its gains by late trading as the Japanese benchmark long-term interest rate jumped from a record-low level set in the morning.
At 5 p.m., the dollar was trading at ¥96.30-35, up from ¥95.59-61 at the same time Thursday. The euro stood at $1.2907-2909, up from $1.2798-2799, and at ¥124.34-36, up from ¥122.38-38.
The U.S. currency moved on a firm note in the morning after topping ¥96 in overseas markets overnight where the BOJ’s new easing policy, which calls for doubling the monetary base in two years to achieve a 2 percent inflation, was highly rated. Brisk dollar demand for settlement purposes and higher stock prices in Tokyo helped the currency rise above ¥97 for the first time since August 2009 in late morning trading.
“The market has now confirmed that the BOJ is serious about overcoming deflation,” a foreign-exchange broker said.
The greenback briefly advanced to around ¥97.20 shortly before noon, but then lost steam to slip below ¥96 in the afternoon on sales triggered by an abrupt surge in the yield on the newest issue of 10-year Japanese government bonds, Japan’s benchmark long-term interest rate. The rate surged to 0.620 percent at one point after hitting a record low of 0.315 percent in early trading.
An official at a foreign bank said there will be no change in the dollar’s uptrend against the yen since the long-term rate is expected to fall back thanks to the BOJ’s easing measures and as interest rate gaps between Japan and the U.S. widen as a result.