The dollar slumped to a 10-week low against the yen in Asia Thursday as ran for cover in the face of tumbling stock markets and concern the US central bank will soon end its massive stimulus programme.
The greenback bought 94.64 yen in Tokyo afternoon trade, down from 95.88 yen in New York late Wednesday and from the high 98-yen range in Tokyo at the start of the week. That put the dollar at levels last seen when the Bank of Japan (BoJ) announced in early April a raft of aggressive monetary-easing measures to boost the economy that sent the yen into a tailspin.
The dollar’s weakness helped push Tokyo’s benchmark Nikkei 225 stock index down 5.28 percent to 12,587.40 by the break Thursday, after US stocks fell sharply in volatile trade a day earlier. Yen trading and the Japanese stock market are closely interlinked as the unit’s value directly impacts the profitability of the nation’s exporters.
Foreign investors had piled into the Tokyo stock market since late last year as the new government pledged to stoke the economy with big spending and an aggressive monetary policy, which pushed down the yen.
“The Nikkei falls because the dollar/yen falls, then the dollar/yen falls further because the Nikkei has fallen — markets are in this vicious circle,” said Atsushi Hirano, head of FX sales Japan at Royal Bank of Scotland.
