DJ: Promising US Signs, 'Abenomics' Push Dollar Up To Y95-Y98 Range

TOKYO--The dollar appears set to rise further against the yen as promising signs in the U.S. economy and easy monetary policy have buoyed hedge funds that are already confident Japan will continue to have success in weakening its currency.

"The dollar could rise to as high as Y97.00 by April 1," said Jonathan Clark, head of research at FX Concepts, a New York-based fund with $2.9 billion in assets.

Mr. Clark's view is an accurate reflection of widespread market sentiment. Tokyo traders say the greenback has entered a new range to target Y98 within the next few months, where Y95 should serve as a firm floor.

As of 0800 GMT, the dollar was at Y95.36. Earlier in the day, it hit a three-year and seven-month high of Y95.45.

Traders say successful speculators bought dollars around the Y93-Y94 area, investing at least $1 billion in total. They are looking to take profits at Y96 before going long in the U.S. currency again toward Y98.

"We've been seeing aggressive yen-buying by Japanese exporters ahead of annual repatriation toward the fiscal year-end in March, but yen-selling by non-Japanese speculators has completely overwhelmed the purchasing," said a senior dealer in Tokyo.

Fanning the dollar's rise have been bullish signs from the U.S. pointing to a stronger economy, even as the Federal Reserve keeps its easy monetary policy in place. Federal Reserve Chairman Ben Bernanke and Vice Chair Janet Yellen suggested earlier this week the central bank has no plan to shrink its quantitative easing programs in the near term.

Business sentiment data earlier this week by the Institute for Supply Management beat the market consensus, and the number of weekly jobless claims for the week ended March 2 was smaller than expected. Traders say this is an indication of the economy's faster-than-expected recovery.

"You have dovish Bernanke and Yellen in addition to bright economic data. That all feeds into our confidence that rallies in U.S. stocks will continue," said Takumi Nomura, a senior manager of the currency group at Bank of Tokyo-Mitsubishi UFJ. "Dollar-denominated assets, all of them, are just so attractive."

The Dow Jones Industrial Average marked fresh all-time high for the third straight day Thursday, closing at 14,329.49.

Traders will pay attention to U.S. non-farm payrolls data due at 1330 GMT. A Dow Jones survey of economists forecasts the U.S. added 160,000 new jobs in February.

But Hiroshi Maeba, head of FX at UBS in Tokyo, said the dollar is a "buy," regardless of the outcome.

"If the data are good, no doubt you can buy dollars. If the data are somewhat disappointing, you still should buy dollars on dips," he said.

Traders also say Prime Minister Shinzo Abe and his team will keep weakening the yen as part of their efforts to overcome Japan's long-running deflation. His focus on much greater monetary easing through new central bank leadership has already pushed the yen 9% higher this year.

Another practical factor has been the impact of Japan's soaring trade deficit and shrinking current account surpluses, traders say.

Japan's finance ministry announced Friday the current account deficit came to Y364.8 billion in January before seasonal adjustments, with the trade component showing a deficit of Y1.48 trillion, 6% larger than for the same period last year.