The yen weakened against the U.S. dollar Thursday after Japan swung back to a trade deficit in March, with the greenback little-changed against the euro ahead of a keenly awaited Spanish debt auction later in the day.
The ICE dollar index DXY +0.06% , which measures the U.S. currency against a basket of six other major units, was at 79.590, little changed from its level late Wednesday in North American trading.
But against the yen, the greenbackUSDJPY +0.34% rose to ¥81.39 from ¥81.21 Wednesday. The rise came after data released earlier in the day showed a trade deficit of ¥82.6 billion in March compared with a surplus of ¥170.9 billion in February, albeit smaller than the ¥223.1 billion shortfall expected in the monthly trade balance by economists. Read more about Japan’s trade balance.
Some analysts said that although the yen has recovered recently from the decline suffered last month amid expectations for monetary easing by the Bank of Japan, further depreciation can’t be ruled out.
“The bottom line is that the pullback in the [dollar-yen pair] is unlikely to last beyond the short term,” Mitul Kotecha, head of global foreign exchange strategy at Credit Agricole, wrote in a report.
“Speculative investors in particular continue to position for [yen] weakness, with positioning close to multi-year lows, and although such investors have been wrong-footed over recent weeks, we believe the bets will eventually pay off,” he said.
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The drop also came after Bank of Japan Gov. Masaaki Shirakawa was quoted in reports as saying that the central bank is committed to further monetary easing.
The euro EURJPY +0.30% , meantime, was buying ¥106.72, compared with ¥106.38 Wednesday, but moved little against the dollar.
The euro EURUSD -0.03% was fetching $1.3117, a level not far from the $1.3115 in North America Wednesday.
The moves reflected investor caution ahead of an auction of two- and 10-year debt by Spain later Thursday. Worries about the take-up in the auction, which comes two weeks after Madrid sold three-year paper at increased yields, has attracted a lot of media and analyst attention this week.
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