Euro in demand after Bank of Japan intervention; briefly above $1.31 for first time in a month

Euro briefly above $1.31 for first time in a month

LONDON — The euro pushed up above $1.31 for the first time in just over a month Thursday as it continued to gain ground in the aftermath of the Bank of Japan’s intervention to weaken the yen.

By early afternoon London time, the euro was up 0.4 percent at $1.3056, having earlier risen to a high of $1.3109, its first foray above $1.31 since August 11.

Though the Bank of Japan’s first intervention in six years was designed to effect the yen’s value against the dollar, it has had repercussions through the currency markets.

The primary impact elsewhere has been a sharp rise in the euro’s value against the dollar — before the intervention, the euro was trading below $1.30.

Analysts explained that over the last month or so, the yen has borne the brunt of the dollar’s depreciation and now that a “line in the sand” has been drawn by the Bank of Japan, there’s little upside in chasing the yen much higher right now — on Tuesday, the dollar had fallen to a 15-year low of 82.87 yen.

Alan Ruskin, a currency strategist at Deutsche Bank, said the euro is strengthening in its capacity as a “safety valve” in the wake of the Japanese intervention, which has encouraged “negative dollar sentiment to be expressed in the euro.”

And with mounting expectations that the U.S. Federal Reserve will sanction a further easing in monetary policy, possibly involving the purchase of U.S. government bonds, analysts said the dollar could face further downward pressure in the months to come.

By early afternoon London time, the dollar was down 0.2 percent at 85.58 yen while the British pound was 0.3 percent lower at $1.5587.