TOKYO: – The dollar slipped against the yen in Asian trade Wednesday as risk appetite subsided and as eurozone fears returned on news that Greece had brought forward a destabilising presidential election.
The dollar bought 119.52 yen in Tokyo midday trade, slipping from 119.63 yen in New York overnight, lengthening its losses from 120.18 Tokyo earlier Tuesday.
Against the euro, the greenback was rangebound, standing at $1.2372, compared with $1.2378 in New York.
The single currency bought 147.89 yen, turning slightly softer from 148.01 yen in New York.
Investors fled to safety, after seeing falls of stocks around the world on another bout of eurozone turmoil brought about by the upcoming Greek election.
The move raised questions over the recovery plan for the country which nearly caused the breakup of the eurozone.
Overnight Greek stocks plunged 12.8 percent — the largest one-day drop in 27 years — after the government announced the surprise election plan.
Greece’s surprise decision poured cold water on investors who were buying up the dollar, particularly after seeing last week robust US non-farm payroll data and the European Central Bank’s decision not to expand stimulus for now.
“Anyone who bought the US dollar at the start of this week after Friday’s NFP and ECB’s QE jaw-boning has been hosed,” Gavin Friend of National Australia Bank said in a note.
However, the dollar’s uptrend against the yen since October still remains unchanged, said Osamu Takashima, chief FX strategist at Citigroup Global Markets Japan.
“It wouldn’t be a surprise” if the dollar rebounds to move towards the technically important level of 121.30 yen within several days, he told Dow Jones Newswires.
The yen has been steadily dropping against the dollar under the Bank of Japan’s aggressive asset purchase programme, while the US Federal Reserve winds down its similar programme and eyes a possible rate hike next year.
The diverging monetary policy across the Pacific has encouraged investors to pick up the dollar and dump the yen — a trend that many economists believe will last at least through next year.
On the Tokyo bourse the benchmark Nikkei index was down 1.86 percent at 17,481.67 yen in early afternoon trade.
— Dow Jones Newswires contributed to this story –