Yen hits 6-month high against US dollar

London

THE yen hit a six-month high against the US dollar on Monday, gaining for a sixth consecutive session against the greenback as stock markets tumbled and pushed investors to the perceived safety of the Japanese currency.

Wall Street closed lower on Friday, and both Asian and European stock markets fell on Monday as the threat of new lockdowns amid rising cases of the Covid-19 disease made investors anxious about the global recovery.

US stock futures indicated further losses on Wall Street on Monday.

The selloff had a tone similar to a drawdown in March, with stock markets led lower by banks and travel shares, the euro falling, the dollar gaining broadly, and government bond yields falling.

In early deals in London, the yen hit 104.065 against the US dollar, gaining as much as half a per cent. That was its highest level since March 12.

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"An unrelenting rise in coronavirus cases globally is weighing on sentiment at the start of the trading week as investors increasingly question their rosy predictions about the recovery," said Raffi Boyadjian, senior investment analyst at online broker XM.

The US dollar - subdued during Asian hours - perked up in London trade as European stocks sank to two-week lows and US stock futures fell.

The index that measures the greenback against a basket of peer currencies was up 0.3 per cent at 93.267 by midday in London.

Marshall Gittler, head of research at BDSwiss, said the yen's rise was part of a typical "risk-off" move in FX markets with the exception of the Swiss franc, which turned weaker.

"With the pickup in foreign bond yields for Japanese investors getting less and less, capital flows out of Japan may fall even further," he said.

"Meanwhile, with Warren Buffet buying Japanese stocks and a new administration coming in with a focus on economic and regulatory reform, foreign purchases of Japanese stocks may pick up."

The result could be a stronger yen regardless of risk sentiment, Mr Gittler said.

In its past six sessions, the yen has gained 2 per cent against the US dollar.

Key for the US currency's direction this week will be a slew of Federal Reserve speakers, who may shed light on the US central bank's new approach to inflation.

Fed chairman Jerome Powell is due to appear before Congressional committees, while Fed committee members Lael Brainard, Charles Evans, Raphael Bostic, James Bullard, Mary Daly and John Williams are also making public speeches. REUTERS