Reuters: US Dollar Report: FOREX-Bernanke impact fades; yen up on fiscal year flows

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FOREX-Bernanke impact fades; yen up on fiscal year flows Mar 28th 2012, 18:48 Wed Mar 28, 2012 2:48pm EDT * Euro slips as Bernanke effect fades * U.S. durable goods orders below expectations * Japanese fiscal year-end on March 31 nears NEW YORK, March 28 (Reuters) - The euro slid against the dollar o n W ednesday as investors discounted dovish comments from the U.S. Federal Reserve chairman earlier in the week and refocused on the euro zone after comments from an ECB official warning about resolving the debt crisis. The single currency received a boost on Monday when Fed Chairman Ben Bernanke spurred expectations the bank could yet launch a third round of quantitative easing if the U.S. economy needed a boost. Though moderate, a rise in U.S. durable goods orders in February was enough to keep investors focused on the euro zone, with cautious comments from European Central Bank Governing Council member Jens Weidmann adding to wariness around the euro. Weidman's comments come before a meeting of European Union economic and financial affairs ministers in Copenhagen on Friday and Saturday. The yen rose early in the session as Japanese exporters prepared to close their fiscal year on March 31. "The single currency is likely to face additional headwinds over the near-term as the sovereign debt crisis continues to drag on investor confidence," said David Song, currency analyst at DailyFX. "Weidmann argued that increasing the scope of the rescue fund will not bring about 'a lasting solution to the crisis'." The euro fell as low as $1.3275 against the dollar before recovering to change hands down 0.1 percent at $1.3301 in volatile trade, with a full cent separating the session high from the low. Divergent growth in the euro zone would likely continue for the next few years, the ECB's Weidmann said, adding that efforts to seclude debt-ridden economies in the region were stop-gap measures. "We must realize that all the money we put on the table will not buy us a lasting solution to the crisis," he added, saying all this did was buy time "that must be used to address the root causes of the crisis." Some of the euro's declines against the dollar were attributable to more bullishness on the U.S. currency after two-days of debating comments from Fed Chairman Ben Bernanke. Bernanke said on Tue sday it was too soon to declare victory in the U.S. economic recovery, warning against complacency in policymaking as the outlook brightens. "The Fed chief's cautious attitude toward the recovery underscored that the FOMC is unlikely to quickly move away from its zero rate guidance, but at the same time he refrained from signal ling that the Fed is about to initiate another round of QE," said Michael Feroli, chief U.S. economist at J.P. Morgan, referring to the Fed's policymaking committee. YEN FLOWS The dollar fell 0.5 percent to 82.78 yen, while the euro was down 0.6 percent at 110.12 yen. Traders said Wednesday was the deadline for currency transactions to be carried out in time to settle for the fiscal year-end on March 31, the end of the Japanese fiscal year. Yen buying typically rises at the end of the fiscal year for Japanese exporters reporting their financial results in yen. The yen gained 0.9 percent against the Canadian dollar , 0.6 percent against the Swiss franc and 0.9 percent against the pound. As those seasonal effects fade, analysts said the dollar could resume its climb against the Japanese currency. "In general as you get closer to the end of the month you probably see a little more demand for Japanese yen," said Kathy Lien, director of FX research at GFT in Jersey City, adding that much of the repatriation activity already happened last week. "I don't expect repatriation to take dollar/yen lower than 82," she said. Analysts say with the Japanese government and the Bank of Japan stepping up a campaign to stimulate growth, more monetary policy easing could not be ruled out. They expect Japanese authorities moving to weaken the yen and boost exports. Barring the latest bounce, the yen has been under pressure since the BoJ's surprise monetary easing in mid-February, when it expanded its asset-buying scheme by 10 trillion yen and set an inflation goal of 1 percent. At the same time, U.S. Treasury yields have risen, leading to wider spreads over their Japanese counterparts and enhancing the greenback's appeal. The dollar has risen 7.5 percent against the yen so far this quarter and is on track for its best quarterly performance since the first quarter of 2009. Link this Share this Digg this Email Reprints

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