Forex - US dollar extends falls vs yen as market frets about G-7 |
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Mon, 05 Feb 2007 09:22
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SINGAPORE (XFN-ASIA) - The US dollar extended falls, hitting fresh session lows, in late Asian trade as the yen gained on jitters the upcoming G7 meeting will put the Japanese unit under the spotlight and set off carry trade unwinding.Finance ministers and central bankers from G7 nations will meet at the end of this week and there has been mounting speculation the yen's recent weakness could be discussed, sparking fears that this will trigger a sharp unwinding of large yen carry positions built up in recent weeks.'Concerns that the upcoming G7 meeting beginning on Friday will specifically address the weak yen and yen-funded carry trades may continue to cause markets unease this week,' UBS AG said in a note.This morning, players zoomed in on a report by Japanese public television broadcaster NHK, which cited unnamed sources as saying that European nations are unhappy about the potential harm the weak yen and strong euro will have on their exports.Japan is expected to seek other G7 officials' understanding by explaining that Japan's economy is still recovering from deflation, NHK reported.'Even if the G7 meeting does not pose a significant policy risk to yen carry trades, it is best to remember that carry trades since December 2006 were driven by interest rate expectations that have run their course,' DBS Bank analysts warned.The market reaction was to sell euro-yen, from around 156.80 yen to 156.40 yen initially, after some banks took aim for stop-loss sell orders below 156.50 yen.These were quickly cleared out and the pair soon extended the downside past 156.40 yen and eventually fell to 156.21 yen, dragging the dollar-yen south with it.The latter, having started today's session near 121.00 yen, came under pressure as Japanese corporate accounts went on the offer. The pair fell below 121.00 yen minutes after the Tokyo fixing, while the cross decline put additional pressure on the pair and sent it down to a 120.70 yen low.'... there are bids below 120.50 yen but at the same time, the market is wary of decent offers at 121.30 yen,' said a dealer in Asia.Through the afternoon session, the dollar-yen traded between 120.77 yen and 120.90 yen, while the euro-yen was also held near 156.20 yen and 156.50 yen.The euro-dollar was also pushed lower by the yen's gains this morning, marking a low of 1.2936 usd just before noon in Singapore from an earlier high of 1.2963 usd.But the pair began to inch higher in late Asian trade as the euro-yen came off its lows and as the dollar remained under pressure, gaining to the 1.2950 usd region before the session ended.Looking ahead, the US data calendar continues before Friday's start of the G7 meeting.The key release tonight is the ISM's non-manufacturing index, which is expected to rise to a reading of 57.0 in January from 56.7 in December, according to a Market News International survey.Singapore 3.43 pm (0743 GMT) vs Sydney 2:23 pm (0323 GMT)US dollaryen 120.66 down from 120.76sfr 1.2475 down from 1.2498Eurousd 1.2954 up from 1.2940yen 156.31 up from 156.24sfr 1.6162 down from 1.6171stg 0.6591 up from 0.6587Sterlingusd 1.9649 up from 1.9645yen 237.11 down from 237.21sfr 2.4515 down from 2.4551Australian dollarusd 0.7739 up from 0.7733stg 0.3938 down from 0.3939yen 93.37 down from 93.395New Zealand dollarusd 0.6839 up from 0.6837singapore@xfn.com
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Japan end-Dec forex reserves 895.32 bln usd vs 896.95 bln in Nov - UPDATE 