Monday March 3, 2014 - 23:24:12 GMT
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Reuters - www.reuters.com
FOREX NEWS - Yen holds ground as Ukraine jitters keep risk at bay
* Yen among best performing major currencies
* Concerns about Ukraine still dampening risk
* RBA rate review to offer some distraction
for Aussie dollar
By Ian Chua
SYDNEY, March 4 (Reuters) - The yen held onto
chunky gains early on Tuesday, having been squeezed higher as skittish
investors dumped riskier assets amid tensions over Russian military
intervention in Ukraine.
The euro traded at 139.30 yen after falling
0.8 percent on Monday, while the dollar fetched 101.43 yen not far from a
one-month low of 101.20.
Russian President Vladimir Putin's forces
have tightened their grip on the Russian-speaking Crimea region, a move
described by U.S. President Barack Obama as a violation of international law
and of Ukraine's sovereignty.
Obama warned his government would look at a
series of economic and diplomatic sanctions that would isolate Russia, which on
Monday saw its stocks, bonds and rouble plummet.
The Russian central bank hiked its key
lending rates and spent as much as $12 billion of its reserves in a desperate
attempt to prop up the rouble.
Heightened geopolitical tensions took their
toll on global stocks but traditional safe havens including gold, U.S.
Treasuries and German Bunds all rallied.
In the foreign exchange market, the yen was
the main beneficiary. The U.S. dollar was also in favour, further helped by a
batch of encouraging U.S. economic data.
U.S. factory activity rebounded from an
eight-month low last month and consumer spending increased more than expected
in January, suggesting the economy was regaining some strength after abruptly
slowing in recent months.
"The overall tone of the data is
optimistic with the major sentiment surveys surprising to the upside. Hence
this should alleviate some of the weather-related concerns and be
USD-supportive," JPMorgan analysts wrote in a note to clients.
The euro last stood at $1.3735, having fallen
0.5 percent on Monday. This helped the dollar index climb to 80.063, pulling
away from a two-month trough of 79.688 plumbed on Friday.
The Swiss franc, usually seen as a safe haven
currency, lost a bit of steam after scaling a two-year peak against the dollar
and a one-year high on the euro.
Commodity currencies, which tend to be sold
off in times of heightened market stress, showed remarkable resilience. The
Australian dollar, for example, edged up to $0.8935 having hit a one-month
The focus for Aussie punters is the Reserve
Bank of Australia's (RBA) policy review due out at 0330 GMT.
The RBA, however, is almost certain to keep
the cash rate at a record low 2.5 percent, having already said last month that
it saw a period of stability in policy.
"The currency has been surprisingly
resilient despite heavy anti-risk sentiment at the start of the week, which may
reflect investors' unwillingness to take directional bets until the RBA
announcement is behind them," said Ilya Spivak, currency strategist at
event risk passes, pent-up selling pressure may be released and send the Aussie
below support near the 0.89 level to the U.S. dollar."
© Thomson Reuters 2014. All rights reserved.
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