Yen slumps to four-and-half year low, stocks gain

Fri May 10, 2013 7:29am EDT
 
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By Richard Hubbard

LONDON (Reuters) - The yen made a decisive break through 100 to the dollar to hit a 4-1/2 year low on Friday, triggering a rise in safe-haven bond yields and supporting gains in European and Japanese shares which hit new five-year highs.

U.S. Treasury 10-year note yield hit a one-month peak of 1.85 percent as the dollar gained on the yen, while stock index futures signaled that Wall Street was set to resume its recent record-breaking rise. .N

The falls in Japanese currency were sparked by a drop in weekly U.S. jobless claims data on Thursday, which added to evidence of a rapidly improving employment market first seen in last week's nonfarm payrolls report. ECONUS

The move was given a further push when Japan's Ministry of Finance revealed on Friday that domestic investors had turned net buyers of foreign bonds in the last two weeks. <JP/CAP>

This confirmed widespread expectations that the Bank of Japan's aggressive stimulus plans would result in a massive flight of money out of the country in a search for higher yielding investments.

"We've had back to back good news in U.S. figures and you have to wind the clock back six to eight weeks to find the last time we had that," said Nick Parsons, head of market strategy at National Australia Bank.

"Once we got through a 100 (yen) and the Japanese bond buying data came out, that added fuel to the fire," he said.

The yen hit a low of 101.66 to the dollar, its weakest level since April 2009, and fell to a three-year trough against the euro of 132.16 yen. Against a basket of major currencies, the dollar hit a two-week high 82.68 .DXY.   Continued...

 
A man walks through the lobby of the London Stock Exchange August 5, 2011. REUTERS/Suzanne Plunkett