Reuters: US Dollar Report: FOREX-Yen up on fiscal year flows; euro volatile

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FOREX-Yen up on fiscal year flows; euro volatile Mar 28th 2012, 20:09 Wed Mar 28, 2012 4:09pm EDT * Japanese fiscal year-end on March 31 nears * Euro last little changed in volatile trade NEW YORK, March 28 (Reuters) - Fiscal year-end repatriation flows supported the yen across the board o n W ednesday, while the euro was little changed against the dollar after a warning from an ECB official about resolving the debt crisis. The yen edged higher early in the session as Japanese exporters prepared to close their fiscal year on March 31. But analysts said they expected the repatriation effect to be short-lived. Though moderate, a rise in U.S. durable goods orders in February was enough to refocus investors on problems in the euro zone, particularly after cautious comments from European Central Bank Governing Council member Jens Weidmann. Weidman's comments come before a meeting of European Union economic and financial affairs ministers in Copenhagen o n F riday and Saturday. "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. The dollar fell 0.5 percent to 82.79 yen, while the euro was down 0.5 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 0.8 percent against the Canadian dollar , 0.5 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. 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. EURO STRUGGLES The euro struggled against the dollar on Wednesday as investors discounted dovish comments from the U.S. Federal Reserve chairman earlier in the week. 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. "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 little changed at $1.3319 in volatile trade, with almost 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 lethargy against the dollar was attributable to more bullishness on the U.S. currency after two days of debating comments from Fed Chairman Ben Bernanke. He 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 signaling 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. Link this Share this Digg this Email Reprints

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