Reuters: US Dollar Report: FOREX-Yen up on fiscal year; Bernanke effect fades

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FOREX-Yen up on fiscal year; Bernanke effect fades Mar 28th 2012, 17:11 Wed Mar 28, 2012 1:11pm EDT * Euro slips as Bernanke effect fades * U.S. durable goods orders below expectations * Japanese fiscal year-end on March 31 nears By Luciana Lopez NEW YORK, March 28 (Reuters) - Fiscal year-end repatriation flows helped support the yen on Wednesday, with the euro sliding against the dollar as effects of dovish comments from the Federal Reserve chairman earlier in the week continued to fade. The yen edged higher early in the session as Japanese exporters prepared to close their fiscal year on March 31, with weaker-than-expected U.S. durable goods orders helping the yen extend gains. "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, who added that much of the repatriation activity already happened last week. "I don't expect repatriation to take dollar/yen lower than 82," she said. Other analysts also said they expected the repatriation effect to be short-lived. The moderate rise in U.S. durable goods orders in February, which failed to fully reverse declines in January, suggested a waning of momentum in the nation's economic recovery and dampened risk appetite, helping the yen and hurting the euro. The single currency got a boost on Monday when U.S. Fed Chairman Ben Bernanke spurred hopes the bank could yet launch a third round of quantitative easing, but it has now fallen back closer to its Monday level. "The market's partially unwinding the Bernanke move from Monday," said Ronald Simpson, managing director of global currency analysis at Action Economics in Tampa, Florida, adding that the Bernanke impact "has run its course for now." Cautious comments from European Central Bank Governing Council member Jens Weidmann added to wariness around the euro. Divergent growth in the euro zone would likely continue for the next few years, he said, adding that efforts to ring fence 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." The euro fell to as low as $1.3275 against the dollar before falling 0.17 percent to $1.3295 in choppy trading. The euro could erode support at $1.33 on Wednesday, said Sean Incremona, an economist with 4Cast Ltd in New York. "Below that the bigger level to the downside looks to be the $1.32 level. That could be a stretch for today." The dollar fell 0.55 percent to 82.73 yen, and the euro, which had traded near flat against the yen before the data, slid 0.69 percent to 110.01 yen. Dealers 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. As those seasonal effects fade, analysts said the dollar could resume its climb against the Japanese currency. "Over the two to three month horizon, we expect dollar/yen to rise to 85 yen as the broad direction is for a higher dollar," said Geoffrey Yu, currency strategist at UBS in London. Analysts say with the 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 Bank of Japan'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 nearly 8 percent against the yen so far this quarter and is on track for its best quarterly performance since early 2009. Link this Share this Digg this Email Reprints

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