Thursday January 22, 2009 - 10:34:38 GMT
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Reuters - www.reuters.com
FOREX NEWS-Yen buoyed, stg pressured but off lows
Thu Jan 22, 2009 4:55am EST
* Yen, dollar buoyed as investors shun risk
* Sterling down on profit-taking but up from 23-year lows
* Traders alert to currency intervention threats
* Stock prices gain; euro zone data likely grim
(Recasts, changes dateline prvs TOKYO)
By Tamawa Desai
LONDON, Jan 22 (Reuters) - The yen held firm on Thursday, supported by its perceived safe haven status, while sterling remained under pressure after hitting 23-year lows against the dollar on Wednesday on bank sector worries even as UK share prices gained.
Comments from the Swiss and Japanese authorities kept traders alert for possible intervention, while a G7 source said sterling would be discussed at the Group's meeting next month.
The yen held near a 13-1/2-year peak against the dollar and a seven-year high versus the euro reached the previous day, buoyed by growing investor anxiety about global banking woes.
"The yen still benefits from risk aversion," said Geoffrey Yu, currency strategist at UBS.
The dollar was down 0.4 percent at 89.00 yen , but off from Wednesday's low of 87.10 yen, the lowest since July 1995.
The euro dropped 0.5 percent to 115.90 yen , falling back towards the seven-year trough of 112.08 yen. Against the dollar, the euro was up 0.1 percent at $1.3062 .
Sterling was down 0.5 percent at $1.3907 . The pound has come under severe pressure this week as a government rescue package for struggling British banks failed to reassure investors or stem losses in banking stocks. At one point on Wednesday sterling plunged to $1.3620, its lowest since 1985.
But some analysts say that selling against sterling may be panning out. "Sterling could bottom out around these levels just as it failed to hit parity with the euro," UBS's Yu said.
As investors move into perceived safer currencies such as the yen and the Swiss franc, their authorities expressed worries that such currency strength would adversely affect their economies.
The Swiss National Bank said on Wednesday it may use unlimited foreign exchange intervention to weaken the Swiss franc and avert deflation [ID:nZAT008113]
That pushed the euro and dollar higher against the franc, with the dollar touching $1.1615 francs , its highest level since early December.
And the Japanese authorities repeated their mantra that they were watching currency moves closely, but refrained from commenting on yen-selling intervention. [ID:nTKG003256]
"The Japanese authorities are likely to refrain from intervening near term, but they could decide to step in if the dollar threatens to fall below 85 yen and leave the domestic equity market in turmoil," said Tomoko Fujii, head of economics and strategy at Bank of America in Tokyo.
Meanwhile, France's economy minister, Christine Lagarde, said on Wednesday the Bank of England should take more steps to support sterling. The pound's weakness gives the UK an unfair trade advantage. [ID:nLL742265]
Separately, a G7 source told Reuters the currency's slide would be discussed at the next meeting of the Group of Seven industrialised countries in February. [ID:nLL70613]
European shares opened higher as banking shares bounced back from recent steep losses, and after gains in Asian and on Wall Street overnight.
Data on Wednesday is expected to show another steep fall in industrial orders.
Meanwhile, rating firm Standard & Poor's cut Portugal's sovereign rating, as widely expected. It was the third country downgrade in the euro zone in a week. (Additional reporting by Satomi Noguchi in Tokyo)
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