Currency market volatility has eased significantly in recent weeks and moves were again muted, though there were signs that optimism over progress in U.S.-China trade negotiations and strong Chinese economic data was pushing investors into riskier currencies.
The yen fell as low as 112.09 per dollar in Asian trading, near a 2019 low of 112.135, before recovering slightly as the European session got under way.
“US dollar and Japanese yen are testing the 112.00 level and we expect the cross to break above this level this week in response to solid US data and stabilising risk appetite,” ING analysts said in a note.
The Swiss franc also eased against the euro, hitting 1.1340 francs. The Swiss currency had strengthened to a 2019 high of 1.1164 francs in late March but has since lost 1.5 per cent.
A relatively upbeat assessment of the global economy out of the International Monetary Fund meeting at the end of last week has helped global investment sentiment.
The positive mood was extended by U.S. Treasury Secretary Steven Mnuchin saying he hoped U.S.-China trade talks were approaching a final lap.
Data out of the world’s biggest economies also pointed to a recovery. On Friday, Chinese exports rebounded sharply and new bank loans increased far more than expected in March.
Although China’s imports remained weak, the data on the whole fuelled hopes that the economy is bottoming out after a soft patch.
The dollar also weakened slightly, allowing the euro to cement gains above 1.13 dollar. The euro rose 0.1 per cent to 1.1315 dollar.
The dollar index slid 0.2 per cent to 96.829.
The more positive mood helped offset any concerns about upcoming trade talks between the United States and Japan, in which Washington is expected to include a currency provision in a bilateral agreement.
“We are seeing a classical risk-on market,” said Minori Uchida, chief currency analyst at MUFG Bank.
But Uchida also believes the dollar’s upside may be limited, given that speculators have already built up large long positions in it.
Data on Friday showed speculators bolstered their net long dollar position in the latest week, pushing it to the highest since December 2015.