Dollar extends losses; yen hits new highs after Abe resignation
The dollar fell on Friday as the U.S. Federal Reserve’s new policy framework suggested that interest rates would remain low, while the yen surged after Japanese Prime Minister Shinzo Abe announced his resignation.
The yen significantly strengthened against the dollar after the news that Abe, Japan’s longest serving prime minister, would step down due to worsening health.
Concerns about a possible shift away from Abe’s expansionary economic policy, known as Abenomics, drove the move in the safe-haven currency, investors said. The dollar was last down 1.0% against the yen at 105.45.
In practice, market participants expect that this means the current ultra-low rates will stay lower for longer, thereby pressuring the dollar. After recovering from an initial slide on Thursday immediately after Powell’s speech, the dollar weakened once again overnight. The dollar index was last 0.5% lower at 92.513.
As the dollar weakened, the euro climbed 0.4% to $1.1875. The euro’s ascent puts it closer to a technical level of $1.19, said Brien, which it has tested periodically over the last month.
Reference: CNBC
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