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 The U.S. currency <.DXY>, hammered since late March by the latest
retreat in expectations for any further rises in U.S. rates, fell 1
percent to less than 109 yen, its weakest in 17 months. <JPY=>
With oil up 1 percent and the prospect of any tightening of U.S.
monetary policy receding, European stock markets scraped together
some initial gains, but the mood remained fragile.
Chinese shares fell more than 1 percent <.SSEC> and the broad
Eurofirst index of Europe's leading companies <.FTEU3> is in its
fourth consecutive week of falls, down almost 10 percent since the
start of January.
A flood of money into the traditional safety of the yen has seen the
Japanese currency gain 9.5 percent in the same period.
"We are in a broad-based soft dollar environment, and given the yen
is cheap in relation to its long-term fundamentals, it is not
surprising it is outperforming," said Petr Krpata, FX strategist at
ING.
"The rise is leading to speculation of intervention by the Japanese.
But we think the bar for that is pretty high."
The euro has also been gaining steadily. But its gains - at $1.1450
overnight it was up more than 8 percent since December - undermine
one of the main pillars of the European Central Bank's push to
refloat the economy, raising the question of whether policymakers
will respond aggressively.
Four of the bank's governing council are due to speak at conferences
on Thursday, with President Mario Draghi due to give a presentation
to Portuguese leaders. The minutes of the bank's March meeting are
also due at 1130 GMT.
"The main focus will be on speeches," analysts from French bank
Credit Agricole said in a morning note.
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"We see limited scope of the ECB sounding less dovish. This is
especially true as Eurozone growth momentum remains broadly
unchanged while medium-term inflation expectations stay close to
historic lows."
By 0814 GMT, the single currency had retreated and was flat on the
day at $1.1390.
The profit-eroding rise in the yen kept the Nikkei <.N225> to a
slight 0.2 percent gain despite a big bounce in the energy and
healthcare sectors. The MSCI's broadest index of Asia-Pacific shares
outside Japan <.MIAPJ0000PUS> was also in positive territory - eking
out a 0.5 percent rise on the day.
A senior Japanese finance ministry official warned the move in the
yen had been one-sided and that the ministry would take steps in the
market as needed.
Bank of Japan Governor Haruhiko Kuroda also repeated that the
central bank would ease policy further if needed, but the market
seems to doubt he can do much more.
The drop in the dollar drove a 5 percent jump in oil prices
overnight as U.S. inventories unexpectedly fell and investors gauged
the possibility of an output freeze.
By 0853 GMT, Brent crude futures <LCOc1> were up 18 cents at $40.02.
U.S. crude <CLc1> rose 8 cents to $37.83. [O/R]
(Additional reporting by Anirban Nag)
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