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Yen recovers, data shows outright swing against dollar

Published 25/04/2016, 08:37 pm
© Reuters.  Yen recovers, data shows outright swing against dollar
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* Yen steadies after hammering on BOJ easing reports

* Pound strong as odds shift against Brexit

* Positioning is net dollar short for 1st time in a year

* Yen longs at long-term highs (Adds more comment, updates prices)

By Patrick Graham

LONDON, April 25 (Reuters) - The yen recovered from a walloping at the end of last week on Monday, with investors focusing on a meeting of the Bank of Japan that many expect to deliver further easing of monetary policy in a bid to halt the currency's rise.

Bets on the yen to strengthen further reached a record high in the week to last Tuesday, while positioning on the dollar turned to betting on outright falls for the first time in a year. IMM/FX

That largely reflects market scepticism that the U.S. Federal Reserve, which also meets on Wednesday, will push on any time soon with rises in interest rates that the rest of the world economy still looks too shaky to deal with.

"Such has been the aggressive move by real money investors to sell the dollar since the start of this year, it just says there is no real faith in what the Fed are trying to do," said Neil Mellor, a strategist with Bank of New York Mellon (NYSE:BK) in London.

"It's tempting to see this as a modest correction to the big move higher we saw last year. But if the dollar is going to rise again, they will have to rebuild belief on markets that they can deliver these higher rates without, say, a blowout in China."

The dollar index traded 0.3 percent lower on the day at 94.863. Against the euro, it dipped to $1.1255, at the weaker end of a 10-cent range it has held for a year.

It fell half a percent to 111.20 yen per dollar.

A number of GDP reports accompany the central bank meetings later this week and strategists say markets may be cautious in the meantime.

Germany's Ifo indicator on Monday may provide some direction, while sterling remains fixated on the ebb and flow of the Brexit referendum campaign.

Sterling was trading around its highest in a month against both the euro EURGBP= and dollar GBP= after U.S. President Barack Obama cautioned against Brexit and a handful of polls showed more support for staying in the European Union.

Bookmakers odds moved further against an "Out" vote.

The yen lost 2.1 percent in value on Friday - its biggest fall since BOJ Governor Haruhiko Kuroda announced a second round of monetary easing in October 2014. The trigger was a Bloomberg report that the Bank of Japan is considering applying negative rates to its lending programme for financial institutions. of more easing have grown but traders are also aware that further BOJ moves may have limited impact in weakening the yen, as did the introduction of negative interest rates in January.

"We are not yet convinced that the yen will continue to weaken in the near-term," said Lee Hardman, currency analyst with Bank of Tokyo-Mitsubishi UTJ in London.

"Our analysts in Tokyo remain unconvinced that the BoJ will ease policy this week. The sharp weakening on Friday could also contribute to easing concern amongst BoJ policymakers over excessive yen strength." (Editing by Andrew Heavens)

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