Anticipation that the Bank of Japan will not increase its the monetary base beyond its current annual rate of 60 to 70 trillion yen ($600 billion to $700 billion) at the end of its two day meeting today has given the yen its strongest appearance against the U.S. Dollar in seven weeks.
The yen touched 96.41 in New York, the best for the Asian currency since June 20th, after falling steadily in Tokyo and London.
Traders in Tokyo took the first move running stops at 97.50 in under a minute from 10 points away and driving the yen 50 points higher to 97.11 in a little over 15 minutes. The dollar recovery reached 97.52 briefly but the former stop level held easily and the dollar decline resumed.
London saw a short liveddollar recovery to 97.34 just before the U.S. open, but the New York market has been all negative for the U.S. currency.
Prime Minister Shinzo Abe first posited a deliberate government policy to weaken the yen as a method for reviving the Japanese economy as a candidate in late 2012. In the subsequent eight months the yen lost 35 percent of its value versus the dollar (9/13/12-77.13, 5/22/13-103.74).
Since its recent July 8th low at 101.53 the yen has gained 4.9 percent against the U.S. currency. It has gained 7.1% since reaching an almost five year low at 103.74 on May 22nd.
Between the May low at 103.74 and the July one at 101.53 was a run higher to 93.79, a 38.2 percent Fibonacci retracement of the overall September 2012 to May 2013 fall .
The May and June yen recovery then retracted to 101.53, the 76.4 percent Fibonacci level of the 101.53-to 93.79 move.
The current level of 96.52 (1:24 pm ET) represents a mere 27 percent recovery of the September 2012 to May 2013 yen decline.
If the Bank of Japan and the Abe government hope to keep the yen weak the market may soon force a raise in their devaluation bid.Joseph Trevisani
Chief Market Strategist