Thursday, June 18, 2009
TOKYO: The euro rose on Wednesday as investors bought it back after steep falls against the dollar and yen this week, but the market struggled for clear direction as it tried to decide if a dollar recovery had run its course. The dollar has fallen against major currencies such as the euro and Australian dollar this year, with investors unwinding safe-haven dollar positions.
The worst of the economic crisis faded and as questions arose over its suitability as the world's reserve currency. Both it and the yen have clawed back some lost ground this month as investors have paused to assess whether rallies in riskier assets including shares have got ahead of themselves. But with a question over its reserve currency status resurfacing on Tuesday, analysts said the market was not sure which direction to head.
"The market seems to be bewildered, facing lots of different factors," said Kazuyuki Kato, treasury department manager at Mizuho Trust and Banking. "And investors are shying away from taking risks after stocks entered a correction phase as optimism for the economy had gone too far," he said.
The euro edged up 0.2 percent from late US levels to $1.3860 after earlier veering towards a one-month low of $1.3747 set on Tuesday. It has gained 11 percent on the dollar since March but is below its 2009 high of $1.4339 set this month.
The greenback fell on Tuesday after Russia suggested ahead of a meeting with leaders of Brazil, India and China there was a need for a reserve currency other than the dollar. In the event, the four leaders avoided the reserve status issue in their statement after the summit, causing the dollar selling to peter out.
"The global financial markets are in correction mode," Yamamoto said. Traders and analysts said currency flows seemed to be driven by short-term players, making the market choppy, but some saw the dollar and the yen as having room to strengthen a bit more.
"The dollar can continue a bit higher but overall the medium-term trend lower is still intact," a senior trader at a European bank in Hong Kong said. The yen reversed early gains after driving the dollar to a two-week low below 96.00 yen and the Australian dollar to a three-week low below 76.00 yen. The dollar rose 0.2 percent to 96.60 and the Aussie dollar climbed 0.5 percent to 76.80 yen.
Traders said talk that Japanese investors may repatriate funds from euro zone bond redemptions had helped push the euro down versus the yen this week, with 15.6 billion euros ($21.6 billion) of redemptions and 2.1 billion euros of coupon payments falling due. The euro has fallen 2.5 percent against the yen since Friday but short-covering pushed it up 0.6 percent to 134.16 yen.
(Reuters)
TOKYO: The euro rose on Wednesday as investors bought it back after steep falls against the dollar and yen this week, but the market struggled for clear direction as it tried to decide if a dollar recovery had run its course. The dollar has fallen against major currencies such as the euro and Australian dollar this year, with investors unwinding safe-haven dollar positions.
The worst of the economic crisis faded and as questions arose over its suitability as the world's reserve currency. Both it and the yen have clawed back some lost ground this month as investors have paused to assess whether rallies in riskier assets including shares have got ahead of themselves. But with a question over its reserve currency status resurfacing on Tuesday, analysts said the market was not sure which direction to head.
"The market seems to be bewildered, facing lots of different factors," said Kazuyuki Kato, treasury department manager at Mizuho Trust and Banking. "And investors are shying away from taking risks after stocks entered a correction phase as optimism for the economy had gone too far," he said.
The euro edged up 0.2 percent from late US levels to $1.3860 after earlier veering towards a one-month low of $1.3747 set on Tuesday. It has gained 11 percent on the dollar since March but is below its 2009 high of $1.4339 set this month.
The greenback fell on Tuesday after Russia suggested ahead of a meeting with leaders of Brazil, India and China there was a need for a reserve currency other than the dollar. In the event, the four leaders avoided the reserve status issue in their statement after the summit, causing the dollar selling to peter out.
"The global financial markets are in correction mode," Yamamoto said. Traders and analysts said currency flows seemed to be driven by short-term players, making the market choppy, but some saw the dollar and the yen as having room to strengthen a bit more.
"The dollar can continue a bit higher but overall the medium-term trend lower is still intact," a senior trader at a European bank in Hong Kong said. The yen reversed early gains after driving the dollar to a two-week low below 96.00 yen and the Australian dollar to a three-week low below 76.00 yen. The dollar rose 0.2 percent to 96.60 and the Aussie dollar climbed 0.5 percent to 76.80 yen.
Traders said talk that Japanese investors may repatriate funds from euro zone bond redemptions had helped push the euro down versus the yen this week, with 15.6 billion euros ($21.6 billion) of redemptions and 2.1 billion euros of coupon payments falling due. The euro has fallen 2.5 percent against the yen since Friday but short-covering pushed it up 0.6 percent to 134.16 yen.
(Reuters)
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