Yen falls as Japanese investors eye overseas assets

The Japanese yen yesterday fell to a 4-1/2-year low to trade at more than 100 to the US dollar. The key level was breached after speculation that Japanese institutional investors were buying overseas assets in search of higher returns.

"Unconfirmed sources said Japanese insurance companies and pension funds are seeking to buy 30-year US Treasury bonds while the treasury bonds in Japan are not rewarding," said Mark Wan, the chief analyst at Hang Seng Investment Services.

Ten-year US Treasury bonds yielded 1.8 per cent, compared with 0.6 per cent for the equivalent bond in Japan, triggering the capital outflow from Japan.

The yen fell to as low as 101.20 per dollar, more than 2 per cent off Thursday's high of 98.65.

The yen has slid 26 per cent against the dollar since September last year, mainly driven by selling pressure from overseas investors.

"When Japanese investors start to sell yen and buy overseas bonds, it will trigger another sell-down in the yen," Wan said.

Japanese investors bought a net 514 billion yen (HK$39.3 billion) in foreign bonds in the two weeks to May 3, Ministry of Finance data shows.