Tokyo: The yen slipped to a record low against the euro in Asian trade Monday as expectations faded of a quick hike to Japan’s super-low interest rates, dealers said.
Market players also digested softer-than-expected inflation figures from the United States, which led to a late-week rally on equity markets.
The euro hit a record high of 165.42 yen in Tokyo afternoon trade from 165.20 late Friday in New York. The single European currency also firmed to 1.3394 dollars from 1.3379.
The dollar firmed to 123.56 yen from 123.45, hovering near a four-and-a-half year high of 123.66 last seen in December 2002.
The United States last week reported headline inflation of 0.7% in May, a bigger rise than the 0.6% expected.
But the more closely watched core rate -- which excludes volatile food and energy prices -- rose by just 0.1%, below forecasts, boosting equities markets.
The weaker-than-expected consumer price index (CPI) “gave a sense of relief to the global financial markets where (bond) yields declined and equity prices increased. The resiliency of the global equity market is confirmed,” said Toru Umemoto, chief forex strategist at Barclays Capital.
“But the CPI figure has only a limited impact on US monetary policy. The Federal Reserve continues to see that underlying inflation pressure remains strong,” he added.
The yen was on the backfoot after Bank of Japan governor Toshihiko Fukui expressed little concern about the currency’s weakness Friday and gave no hints on the timing of any future interest rate rise.
Japanese central bank policymakers left the key overnight rate unchanged at 0.5%, with no members voting for a rate hike.
“Governor Fukui spoke in a somewhat dovish manner,” Umemoto said. “He is very relaxed because inflation expectations are subdued here in Japan and the political situation is also deteriorating.”
Japan is expected to hold elections for the upper house of Parliament in late July, a key test for the survival of Prime Minister Shinzo Abe’s government which has taken a beating due to scandals.
In a thin week on the economic calendar, the market will be attentive to US housing data although they expect few surprises, dealers said.
The housing index by the homebuilders’ association will be released later Monday while housing starts and building permits are due out Tuesday.
Market players believe the housing market is correcting and have already priced in housing starts to be weaker than the previous month, said Barclay’s Capital’s Umemoto.
“Soft data will have limited negative impact so the market could react more significantly to the upside,” he added.
The dollar was mixed against other Asian currencies.
The dollar eased to 1.5374 Singapore dollars from 1.5412 on Friday, to 927.40 South Korean won from 929.65 and to 9,040 Indonesian rupiah from 9,053.
It firmed to 32.58 Thai baht from 32.50, to 33.141 Taiwan dollars from 33.128 and to 46.72 Philippine pesos from 46.52.