Forex - Yen continues climb amid carry trades jitters |
|
|
|
Published
:
Fri, 02 Mar 2007 19:16
|
LONDON (AFX) - The yen continued its steady climb, firming to levels not seen since mid-December against the euro, dollar and pound, as carry trades continued to unwind.The unwinding of carry trades -- when investors borrow in low-yielding currencies to invest in higher yielding assets elsewhere -- has been supporting the yen all week amid a drop in risk appetites.A 9 pct plunge in the Chinese stock market Tuesday triggered falls around the world. Stock markets have since stabilised although overall sentiment remains jittery. While the Shanghai composite index chalked up a 1 pct rise today, the Nikkei index in Japan lost 1.4 pct while Wall Street has opened lower.Notably, the dollar fell under the 117 yen level after several attempts.'The fresh selling on the dollar-yen has taken traders by surprise after what they deemed was significant buying above the figure in the last hour,' said Rhonda Staskow at Thomson IFR Markets.'Lows of 116.83 yen have been seen so far but is still stalling ahead of the 116.75 yen lows posted earlier,' she said.Additionally, she noted that some traders are blaming the dollar's drop against the Swiss franc for the US currency's wider losses.Meanwhile, Daniel Katzive at UBS said 'carry trades appear to remain under stress' despite mixed data out of Japan last night.He noted the risk level as measured by the UBS Forex Risk Index remains pretty much at lows seen yesterday.As carry positions are believed to remain quite stretched, 'we think that the big carry trade unwind has further to run,' he said.It was notable that there has been a perceptible change in Japanese rhetoric on carry trades. Hiroshi Watanabe, vice finance minister for international affairs and who's in charge of forex intervention, estimated the size of the yen carry trade at several tens of trillions of yen, and said that he expected the Japanese central bank to continue normalising interest rates.'In the past, Watanabe has downplayed the significance of the yen carry trade so his comments are bullish for yen,' said Katzive.Meanwhile, data out of Japan today was mixed. Core inflation for January was in line with expectations, while the jobless rate for the same month improved slightly, while household spending was well above expectations.'On balance the data was slightly better than expected, but not enough to justify a shift in Bank of Japan expectations or an acceleration of carry trade unwinds,' said Katzive.In the US, the University of Michigan consumer sentiment survey came in weak, undoing some of the feel-good factor arising from yesterday's stronger than expected US manufacturing sector PMI.The pound was trading at week lows against the dollar, as well as being slightly weaker against the euro, as it reversed some of its solid gains yesterday on the back of strong surveys on UK manufacturing and the retail sector.London 1739 GMT London 1455 GMTUS dollaryen 116.60 down from 117.10sfr 1.2166 down from 1.2206cad 1.1753 up from 1.1713Eurousd 1.3185 up from 1.3173stg 0.6780 up from 0.6775yen 153.70 down from 154.21sfr 1.6040 down from 1.6085Sterlingusd 1.9448 up from 1.9444yen 226.70 down from 227.77sfr 2.3970 up from 2.3933Australian dollarusd 0.7828 unchanged 0.7828stg 0.4027 up from 0.4020yen 91.27 down from 91.67sivakumar.sithraputhran@thomson.comss/lamCOPYRIGHTCopyright AFX News Limited 2007. All rights reserved.The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.
|
|
|
|
Print this Story
Forex - Yen falls further as BoJ rate setter signals no hurry to lift rates 