Yen Rallies against Dollar as Main Asian Stock Index Plunges

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Yen Rallies against Dollar as Main Asian Stock Index Plunges The yen touched its strongest level in three weeks versus the dollar after MSCI Asia Pacific Index plunged 1.4 percent, its steepest since March 20, spurring demand for safer assets.

The yen advanced 0.2 percent to 101.49 a dollar as of 9:12 a.m. in London, and touched 101.43, its highest since April 14.  It also climbed 0.2 percent to 141.36 a euro. The euro remained slightly unchanged at $1.3929, down from Tuesday’s high of $1.3951, its strongest since March 13.

The MSCI Asia Pacific Index fell after a report indicated that China’s services industry grew much slower than expected in April. Its decline was also egged by Washington’s calls for Ukraine to continue with its plans to hold its presidential election on May 25, despite Russia’s opposition to the move.

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“The capitulation in the equity market is the key driver of dollar-yen,” Jeremy Stretch, a London-based head of foreign-exchange strategy at Canadian Imperial Bank of Commerce told Bloomberg. “It’s a risk-off session. The yen is leading the pack.”

The New Zealand dollar plunged roughly 0.4 percent against its 16 major peers following comments by Reserve Bank Governor Graeme Wheeler that the bank may sell the currency should it stay high and weigh on fundamentals.

“If the currency remains high in the face of worsening fundamentals, such as a continued weakening in export prices, it would become more opportune for the Reserve Bank to intervene in the currency market to sell New Zealand dollars,” said Wheeler.

The kiwi’s decline was also fuelled by a report that showed that prices of whole-milk powder fell for the sixth consecutive auction. The NZ dollar plunged 0.5 percent to 86.95 U.S. cents after earlier rising to 87.80, the most since August 2011.To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com