Monday June 22, 2009
TOKYO: The yen rose on Monday, gaining in particular against the euro and Australian dollar in a climate of uncertainty ahead of the Federal Reserve meeting this week and stalling investor confidence in riskier assets.
The euro was also under pressure as the market awaited the European Central Bank's first ever one-year refinancing operation on Wednesday aimed at getting banks lending again and reducing the cost of borrowing for banks, firwms and consumers.
Traders said euro selling by funds which use computer trading models had kicked in, driving the single European currency lower against both the dollar and the yen.
This fed into already cautious sentiment among investors, who were also taking profits on trades in commodity-related currencies and other currencies which have rallied against the yen and dollar in the past three months along with shares.
"The markets overall are a bit whippy and the euro is under a bit of pressure as the market starts to focus on the long-term repo on Wednesday," said a senior trader at a European bank in Hong Kong.
The euro fell 0.7 percent to 133.32 yen, well down from its eight-month high above 139 set early in the month, and dropped 0.2 percent to $1.3912, well below a five-month peak of $1.4339 at the start of June.
Traders cited several factors as fuelling selling of the euro, including profit-taking ahead of the quarter end and an article in the Wall Street Journal about Germany's widening budget shortfall.
But uncertainty about the impact on the euro of the ECB's refinancing operation, how much liquidity it will generate and what it will do to money market rates seemed to be one of the main factors weighing on the single European currency..
The dollar lost 0.3 percent to 95.85 yen as the Japanese currency's strength elsewhere helped it higher.
The Fed's Open Market Committee meets on Tuesday and Wednesday and the market is waiting to see what it says about the economic outlook and a rise in Treasury debt yields, and if it makes any move to expand or extend its debt buyback programme.
"The Fed needs to find a balance between not killing the recovery through rate hike hopes, while at the same time not over-committing on keeping rates low," UBS analysts wrote in a research note.
Markets have drifted in the past few days as investors are still trying to decide if a three-month rally in riskier assets, including shares, has outrun the pace at which the global economy is healing.
Shares were firmer but not blasting higher, with the Nikkei average 0.4 percent up and the Australian market rising 0.4 percent.
One trader said news that rating agency Moody's had warned California it faced a "multi-notch" downgrade in its credit rating if it failed to act quickly to produce a budget had also fueled investor unwillingness to hold riskier positions.
(Reuters)
TOKYO: The yen rose on Monday, gaining in particular against the euro and Australian dollar in a climate of uncertainty ahead of the Federal Reserve meeting this week and stalling investor confidence in riskier assets.
The euro was also under pressure as the market awaited the European Central Bank's first ever one-year refinancing operation on Wednesday aimed at getting banks lending again and reducing the cost of borrowing for banks, firwms and consumers.
Traders said euro selling by funds which use computer trading models had kicked in, driving the single European currency lower against both the dollar and the yen.
This fed into already cautious sentiment among investors, who were also taking profits on trades in commodity-related currencies and other currencies which have rallied against the yen and dollar in the past three months along with shares.
"The markets overall are a bit whippy and the euro is under a bit of pressure as the market starts to focus on the long-term repo on Wednesday," said a senior trader at a European bank in Hong Kong.
The euro fell 0.7 percent to 133.32 yen, well down from its eight-month high above 139 set early in the month, and dropped 0.2 percent to $1.3912, well below a five-month peak of $1.4339 at the start of June.
Traders cited several factors as fuelling selling of the euro, including profit-taking ahead of the quarter end and an article in the Wall Street Journal about Germany's widening budget shortfall.
But uncertainty about the impact on the euro of the ECB's refinancing operation, how much liquidity it will generate and what it will do to money market rates seemed to be one of the main factors weighing on the single European currency..
The dollar lost 0.3 percent to 95.85 yen as the Japanese currency's strength elsewhere helped it higher.
The Fed's Open Market Committee meets on Tuesday and Wednesday and the market is waiting to see what it says about the economic outlook and a rise in Treasury debt yields, and if it makes any move to expand or extend its debt buyback programme.
"The Fed needs to find a balance between not killing the recovery through rate hike hopes, while at the same time not over-committing on keeping rates low," UBS analysts wrote in a research note.
Markets have drifted in the past few days as investors are still trying to decide if a three-month rally in riskier assets, including shares, has outrun the pace at which the global economy is healing.
Shares were firmer but not blasting higher, with the Nikkei average 0.4 percent up and the Australian market rising 0.4 percent.
One trader said news that rating agency Moody's had warned California it faced a "multi-notch" downgrade in its credit rating if it failed to act quickly to produce a budget had also fueled investor unwillingness to hold riskier positions.
(Reuters)
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