Monday October 27, 2008 - 10:43:22 GMT
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Reuters - www.reuters.com
FOREX NEWS-Yen gains despite G7, dlr firm, more RBA buying seen
* Yen rallies despite G7 warning on yen volatility
* Yen near 13-year peak vs dlr <JPY=>, gains vs euro
* Euro hits 2-year low vs dollar <EUR=>
* Traders say RBA continues Aussie dollar-buying in Europe
(Releads, adds quotes, updates prices, changes dateline prvs
By Tamawa Kadoya
LONDON, Oct 27 (Reuters) - The yen rallied on Monday despite
the Group of Seven singling out excessive volatility in the
Japanese currency, while the dollar hit a two-year high against
the euro as investors scrambled to shed riskier investments.
The yen was hovering below 13-year peaks against the dollar
<JPY=> but hit its highest since May 2002 against the euro
G7 finance authorities issued a statement saying it was
concerned about recent excessive volatility in the yen and would
continue to monitor markets closely, and cooperate as
appropriate [ID:nT78987], raising the spectre of coordinated
The yen has surged sharply due to unwinding of carry trades,
which use the low-yielding yen to buy everything from
higher-yielding currencies to stocks and commodities. Such
trades have collapsed in the past few weeks as market players
have been forced to sell many assets to raise cash.
The yen has struck a 13-year peak against the dollar, a
six-year peak against the euro and many other milestones in its
roughly 20 percent surge on a trade-weighted basis this month.
"We're just seeing more of the same... the G7 communique and
Japan have issued various kinds of warnings, but if people are
unwinding and they are distressed sellers, then they've got to
do what they've got to do," a London-based trader said.
Japanese finance minister Shoichi Nakagawa said on Monday
that he was watching currencies with "great interest".
But some analysts said that while the possibility of
currency intervention was closer, it may still take time for
authorities to act.
"It was hardly a warning shot, it was more like saying we
are aware of recent volatility ... we're not there yet for
intervention," said Geoffrey Yu, currency strategist at UBS in
While not ruling out intervention by Japanese authorities if
the dollar sinks to 80-85 yen sharply, "the likelihood is that
everything will be done through the G7 framework, that's what
the U.S. Treasury wants," he added.
At 1012 GMT, the dollar was down 1.8 percent against the yen
from late U.S. trade last week to 92.49 yen, pulling back after
rising to near 94.50 yen after the G7 warning.
On Friday the U.S. currency slid to a 13-year low of 90.90,
according to Reuters data.
The euro was down 3.4 percent at 114.95 yen, after hitting a
near 6-1/2 year low of 113.64 yen. Against the dollar, the euro
dropped more than 2 percent to a near 2-1/2 year low of $1.2335
The dollar has also soared against most other currencies,
reaching a six-year high against the pound <GBP=>, as investors
have unwound positions in many markets and boosted cash holdings
in the greenback for investor redemptions.
Meanwhile, the Reserve Bank of Australia continued to
intervene in the currency market, buying Aussie dollar for U.S.
dollar in Europe on Monday, traders said. [ID:nLR296487]
The RBA confirmed it had intervened in foreign exchange
markets on Friday and in Asian trade earlier in the global
session to stabilise the flagging Australian currency.
The Australian dollar shed 2.6 percent to $0.6069 <AUD=D4>,
back near a six-year low. Against the yen, the Aussie fell 1.3
percent at 56.2 yen <AUDJPY=R> after sinking to 55.11 yen on
Friday -- the lowest since it was allowed to trade freely.
Reaction was muted to data showing German corporate
sentiment fell more than expected in October to its lowest level
since May 2003.
The Munich-based Ifo economic research institute said on
Monday that its business climate index fell to 90.2 from 92.9 in
(Reporting by Tamawa Kadoya; Editing by Victoria Main)
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