Breakaway yen keeps dollar under the cosh

A stronger-than-expected U.S. jobs report overnight briefly lifted the greenback. But traders are taking recent signs of U.S. economic resilience as cues for a broader brightening in global growth and are laying bets on Japan as a likely winner.

The ‌yen is up ⁠more ⁠than 2.6% since Prime Minister Sanae Takaichi’s Liberal Democratic Party swept to a landslide victory at Sunday’s election and a mood shift ​seems to be afoot as markets set aside fears about spending to focus on growth.

Against the dollar, the yen ​traded as strong as 152.55 on Wednesday, before steadying slightly below that at 153.05 per dollar on Thursday. The rebound is nascent – since the yen has been declining for years – but it has been big enough ​to turn heads in the market.

“It’s Japan buying,” said Naka Matsuzawa, ⁠chief strategist ‌at Nomura Securities in Tokyo, with the yen – rather than the euro – turning ​into the favoured ​avenue for investing outside the U.S.

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“Foreigners are buying both stocks and bonds,” he said.
“With ⁠a stronger government, the market hopes for higher growth.”Yen gains could ​easily accelerate, analysts said, if it broke past resistance around 152 per ​dollar, or even the 200-day moving average at 150.5. It has also made headway against crosses, rising 2% on the euro in two sessions and breaking to the strong side of a 50-day moving average.

Overnight data showed U.S. job growth unexpectedly accelerated in January and the unemployment rate fell to 4.3%. A survey published earlier in the month showed a surprise rebound in U.S. factory activity in January.

Thursday morning moves ‌were fairly small, but the Australian dollar was above 71 cents and creeping back towards a three-year top after the central bank governor said the board would hike rates ​again if inflation ​becomes entrenched.

The euro was ⁠firm at $1.1875, sterling held at $1.3628 and the kiwi at $0.6052.

The other major mover on the dollar in recent weeks has been China’s yuan, which has been a steady gainer on the back of booming exports and hints ​from authorities that China may tolerate a stronger currency.

Corporate demand ahead of the Lunar New Year holiday helped it to a 33-month top of 6.9057 per dollar on Wednesday and in offshore trade on Thursday it was a fraction firmer still at 6.9025.

This week the U.S. dollar index is down 0.8% to 96.852. In terms of potential catalysts, U.S. jobless claims figures are due later on Thursday and January inflation data is due on Friday.