Thursday November 15, 2007 - 11:52:54 GMT
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Reuters - www.reuters.com
FOREX NEWS-Yen up as market jitters prompt flight to safety
(Recasts, changes byline, updates prices, adds quotes)
By Simon Falush
LONDON, Nov 15 (Reuters) - The yen rose versus the euro and
dollar on Thursday and high yielding currencies dipped as
concerns about the effects of the credit crunch and falling
equity markets led investors to pare back risky carry trades.
The Japanese currency extended gains as weaker Asian stock
markets were followed by a slide in European equities and by
futures pointing to a lower open on Wall Street, which led
investors to sell high yielding currencies in favour of safe
"The fog has not yet cleared on the effects from recent
market turbulence. There is a continued environment of
uncertainty and this is being felt in the FX market," said
Phyllis Papadavid, currency strategist at Societe Generale.
"The yen has shown a strong correlation with risk appetite
and to the degree that there is risk aversion it will outperform
its G10 counterparts."
At 1108 GMT the dollar was down 0.75 percent on the day at
110.59 yen <JPY=>, moving back towards 18-month lows of 109.10
yen set earlier this week.
The euro was down 1 percent at 161.64 yen <EURJPY=>.
The dollar, which is under pressure due to expectations of
interest rate cuts from the Federal Reserve, was down 0.25
percent versus the euro at $1.4620 <EUR=>, in sight of last
week's record high of $1.4752, according to Reuters data.
The outlook for interest rates in the United States may
become clearer later in the session with the release of October
U.S. inflation data at 1330 GMT.
Underlying U.S. consumer prices excluding food and energy
are expected to have risen 0.2 percent last month, the same pace
of increase as in September.
Financial markets are still pricing in more interest rate
cuts from the Federal Reserve, discounting a three in four
chance of a 25 basis point cut next month.
HIGH YIELDERS SLIDE
The high yielding Australian dollar fell 0.6 percent <AUD=>
against the greenback and the New Zealand dollar fell 0.9
percent <NZD=>. The pound fell to a three-week low against the
dollar, hit by an unexpected fall in retail sales data <GBP=>.
These high yielders could see further losses as a result of
hedge fund withdrawals according to some analysts.
Investors have to give 45 days' notice if they want to
withdraw cash from hedge funds which means that those who want
to close their positions by year-end have to say so now.
"Clients may take some money off the table as was the case
in Q3 when Aug. 15 was marked with massive selling across all
equity indices," said Ashraf Laidi, chief FX analyst at CMC
Markets U.S. "In this case we expect renewed rallies in the yen
crosses and for the Aussie, kiwi and loonie to come under
In a sign of the continuing impact of turmoil in U.S. credit
markets, General Electric Co (GE.N: Quote, Profile, Research) said on Wednesday its
short-term bond fund ran into trouble amid losses on
asset-backed securities and all its outside investors have
liquidated their holdings. [ID:nN14246316]
British bank Barclays Plc (BARC.L: Quote, Profile, Research) on Thursday said its
investment banking arm made a $2.7 billion writedown due to its
credit market exposure, but that broadly cheered investors, some
of whom had expected heftier losses of up to $10 billion.
(Editing by Gerrard Raven)
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