Sunday April 15, 2007 - 23:51:41 GMT
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Reuters - www.reuters.com
FOREX NEWS-Yen falls to record low vs euro after G7
FOREX-Yen falls to record low vs euro after G7
Sun Apr 15, 2007 7:44pm ET147
TOKYO, April 16 (Reuters) - The yen fell to a record low against the euro on Monday as the Group of Seven meeting of finance ministers and central bankers did not single out the Japanese currency's weakness.
The G7 communique released in Washington on Saturday repeated a call for exchange rates to reflect economic fundamentals and cited China again by name, using the exact same wording as a statement issued after a meeting in Essen, Germany, in February.
Traders said the G7 meeting appeared to give a green light to carry trades, where investors fund in low-yielding currencies such as the yen to invest in higher yielding assets.
After the last G7 gathering of finance minsters and central bankers, European Central Bank President Jean-Claude Trichet had warned about financial markets building up one-sided bets in carry trades but made no such remark this time.
"The market's reaction to sell the yen is natural as players saw the G7 as allowing the euro to strengthen further against the yen and the dollar due to the strong euro zone economy," said Nobuo Ibaraki, a deputy general manager at Nomura Trust and Banking.
Although risks are building for one-sided bets, the yen remains pressured against other currencies for now, due to expectations that the carry trade will continue, he said.
The euro rose to a record high of 162.43 yen , the highest since the single currency was first launched in 1999, compared with 161.33 yen in late U.S. trade on Friday.
The dollar rose to its highest since late February of 119.72 yen before easing back down to around 119.37 yen. The U.S. currency fetched 119.25 yen in late New York.
The euro edged up to a two-year high around $1.3573 compared with $1.3530 and was approaching the all-time high of $1.3760 struck in December 2004.
Although French central bank governor Christian Noyer said the G7 message sought a stronger dollar and a yen that reflected Japan's economic recovery, traders said further weakness in the Japanese currency was to be expected.
"It took a quite a soft tone on the yen," said Danica Hampton, currency strategist at Bank of New Zealand.
"Notably, the communique did not make any mention of the recent weakness in the yen. Overall, I think it gives a green light on carry trades."
The New Zealand dollar, which has the highest interest rate among industrialised countries, gained about a quarter of a cent to a two-year high of $0.7398.
Â© Reuters 2007. All Rights Reserved.
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