The Japanese yen traded at 106.51 against the USA dollar on Monday, up 0.2% from an earlier low of 106.14.
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It extended the previous day’s rally, which was boosted by a surprising monetary decision made by the Bank of Japan.
Asian shares fell in early trading on Monday, with Japan’s Nikkei plunging after the dollar notched a fresh 18-month low against the yen.
All eyes are on an interest rate decision by the Reserve Bank of Australia (RBA) on Tuesday.
Last week, the yen saw its biggest weekly gain since 2008 – more than 5 percent against the dollar – as the Bank of Japan held off from expanding its stimulus.
Major Japanese exporters sold off sharply, with shares of Toyota closing down 3.75 percent, Nissan down 4.95 percent and Honda off 3.98 percent in the wake of a stronger yen, which is usually negative for exporters as it makes their products less competitive overseas and decreases their overseas profits when converted back into the Japanese currency.
The dollar index which measures the greenback’s value against the euro, yen and four other currencies, was up 0.3 percent at 93.242, rebounding from its lowest in more than 15 months on Tuesday.
Measuring by the trade-weighted index used by the European Central Bank, the euro rose on Tuesday past levels around 96 assumed by the bank in its last forecasts, spurring speculation officials may seek to talk the currency down.
On Friday of last week, markets in Japan were closed for one of its national holidays.
The euro was at $1.1533, having broken the $1.15 barrier Monday for the first time in nine months following the United States factory report, which came hours after a similar survey of eurozone manufacturing activity showed a slight improvement.
Thin liquidity also amplified moves, as Japan was in the middle of its Golden Week series of holidays.
On Tuesday, the dollar index had hit a low of 91.919, its weakest level since January 2015. The majority of economists surveyed by Reuters had expected no change at the meeting.
The Aussie dollar lost 2.3 percent to $0.7486 AUD=D4, hitting its lowest in over five weeks.
Bond prices fell. The yield on the 10-year Treasury note rose to 1.84 percent. While it kept the door open to a hike in June, it gave no signals that it was in a hurry to tighten further given the economy’s slowdown, even as the labor market has improved.
In the oil sector, Inpex is losing more than 4 percent and refiner JX Holdings is down more than 3 percent.
“Until Governor Kuroda is willing to grab the bulls by the horns and confront market fears over the BoJ’s balance sheet, the path of least resistance for dollar-yen is down”.
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US crude futures CLc1 rose to $45 a barrel, slightly below the 2016 high of $46.78 hit on Friday but 80 percent above February’s low.
