After two days of strong gains, the dollar turned lower against most other currencies on Thursday, March 15th, after the government released strong U.S. jobs and manufacturing data.
The dollar became less attractive as a funding currency for carry trades, after the U.S. 2-year Treasury yields hit a 7-1/2-month high after solid retail sales data. The dollar hit a session high at 83.32 yen, its highest level since mid-April and the majority of traders expect a short correction soon, before refocusing on last year’s high at 85.53 yen.
“The move in the yields was essential for the dollar rally to continue,” said Sumino Kamei, senior currency analyst at the Bank of Tokyo-Mitsubishi UFJ in Tokyo.
Japan’s economy minister said that Japanese companies should take advantage of the strong yen which would help them increase overseas investments and buy natural resources. Statistics show that Japanese companies have spent $69.5bn on overseas assets in 2011, more than double their 2010 total but less than the record $74.2bn of deals completed in 2008.
“We should use the strong yen assertively to invest and buy things, to be as proactive as possible,” said Mr Edano, whose brief also includes trade and industry. “Japan is short on resources, so we need to use this opportunity to firmly secure rights to energy and commodities.”