Monday October 27, 2008 - 21:05:49 GMT
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Reuters - www.reuters.com
FOREX NEWS-US dollar, yen uptrend intact as risky assets shunned
* Yen near 13-year peaks vs dollar despite G7 warning
* Dollar gains vs euro, sterling
* Markets on alert for BoJ intervention
By Gertrude Chavez-Dreyfuss
NEW YORK, Oct 27 (Reuters) - The dollar and yen advanced on
Monday as fears of global recession prompted investors to
abandon risky assets, boosting both currencies that were sold
to finance these investments.
The yen hovered near 13-year peaks against the dollar and
rose to its highest since 2002 versus the euro, despite a
statement from the Group of Seven finance officials expressing
concern about excessive volatility in the Japanese currency.
The dollar climbed to its strongest level against the single
euro zone currency in about 2-1/2 years.
The G7 major industrialized nations said they would
continue to monitor markets closely, and cooperate as
appropriate, raising prospects for a coordinated currency
intervention. For more see [ID:nSP96492].
"The whole deleveraging dynamic playing out is accompanied
by a reversal in carry trades," said Jack Crooks, president of
Black Swan Capital in Palm City, Florida.
"Both the dollar and the yen, which sport the two lowest
yields among major currencies, are the biggest beneficiaries of
global capital flows right now. Jumping in front of (these two)
is like jumping in front of a freight train -- it simply
The yen, which has risen roughly 20 percent on a
trade-weighted basis .IBOXXFXJPY this month, has gained as
investors unwound carry trades, which used the low-yielding yen
to buy everything from higher-yielding currencies to stocks and
commodities. These trades have collapsed in recent weeks as
market players have been forced to sell assets to raise cash.
The dollar was also a beneficiary of global deleveraging.
Investors had used dollar-denominated loans to pump up
investments elsewhere. When the crisis escalated over the
summer, borrowers began calling in these loans, resulting in a
scramble for dollars.
In late afternoon New York trading, the dollar <JPY=> was
hovering around 94.00 yen, pulling back after rising to about
94.48 yen after the G7 warning. On Friday, the U.S. currency
had slid to a 13-year low of 90.95, according to electronic
trading platform EBS.
YEN INTERVENTION MAY BE LESS EFFECTIVE
The euro rebounded somewhat to 117.68 yen as U.S. stocks
repaired morning weakness, after it hit a 6-1/2-year low of
113.62 <EURJPY=> during earlier trade, EBS data show.
Traders said the G7 warning has fallen on deaf ears, as
investors continued to snap up the Japanese currency while the
Nikkei stock index .N225 plunged over 6 percent.
French Finance Minister Christine Lagarde said on Monday
any intervention on the yen will be a purely Bank of Japan
undertaking. For details, see [ID:nPAB004453].
"Chances of a successful yen-selling intervention are weak
as long as the currency remains boosted by capital (returning)
to the yen," said Ashraf Laidi, chief currency strategist at
CMC Markets USA in New York.
He added that intervention would also be futile as Japanese
investors, who in the past had embarked on foreign equity
buying, have turned risk averse, with the 26-year low in the
Nikkei wiping out much of their wealth.
Against the dollar, the euro was also a little firmer in
afternoon trade around $1.2544. Earlier, it fell to a
2-1/2-year low at $1.2335 <EUR=>. The euro had been hurt by
comments from European Central Bank President Jean-Claude
Trichet saying the bank could cut rates at its next meeting on
Nov. 6. See [ID:nFAE002606]. The ECB has cut rates by 50 basis
points together with other central banks early this month.
The Reserve Bank of Australia intervened in the currency
market buying Aussie dollars and selling the greenback in
Europe on Monday, traders said. [ID:nLR483412]. It also
confirmed it had intervened on Friday and in Asian trade
earlier in the global session to stabilize the flagging
The Australian dollar fell to a 6-1/2-year low at
US$0.6025, according to Reuters data. It was last at US$0.6090
<AUD=>. Against the yen, the Aussie was at 57.23 yen <AUDJPY=R>
after sinking to 55.11 yen on Friday, the lowest since it was
allowed to trade freely in December 1983.
(Editing by Toni Reinhold)
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