Reuters: US Dollar Report: FOREX-Yen firms against dollar into fiscal year-end

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FOREX-Yen firms against dollar into fiscal year-end Mar 28th 2012, 10:05 Tweet Share this Email Print Wed Mar 28, 2012 6:05am EDT * Japanese exporters sell major currencies vs yen * Short yen positions vulnerable to further shakeout * Euro inches up but stays below previous day's 1-mth high * U.S. durable goods orders in focus By Neal Armstrong LONDON, March 28 (Reuters) - The yen rose against the dollar on Wednesday, supported by seasonal flows from Japanese exporters buying at the end of their financial year, with an accumulation of short positions against the dollar looking vulnerable to a further squeeze. The dollar was down 0.3 percent at 82.89 yen after falling to a session low of 82.61 in early European trade. "Short yen versus the dollar has been the main theme of the quarter and the market seems to have taken it too far heading into the Japanese fiscal year-end," said John Hardy, currency strategist at Saxo Bank. "If you look at US/Japan rate spreads, they are not supportive of where dollar/yen is at the moment." Investors pay close attention to the spread between two-year U.S. and Japanese government bond yields. That has narrowed significantly from highs earlier in the month of around 28 basis points to 21 basis points on Wednesday. "I still think the big driver for dollar/yen will be U.S. rate expectations. The Fed's Bernanke has given a strong signal that rates will stay low for some time to come so the upside potential for dollar/yen is limited," said Ian Stannard, head of European FX strategy at Morgan Stanley. Yen buying by Japanese exporters tends to pick at month-end, and there is now additional focus on potential flows as the financial year for most Japanese companies closes at the end of March. Such seasonal factors helped spur yen-buying by Japanese exporters on Wednesday, despite reports that some had already hedged their foreign exchange exposure for the next few months. Dealers said Wednesday was the deadline for currency transactions to be carried out in time to settle for the fiscal year-end. The yen has been under pressure since the Bank of Japan's surprise monetary easing in February, when the central bank expanded its asset-buying scheme by 10 trillion yen and set an inflation goal of 1 percent. The dollar hit an 11-month high of 84.187 yen earlier this month on trading platform EBS and traders said it remains strongly supported. They pointed to stop-loss dollar sell orders which would deepen its fall on the day at around 82.60 with support the 21-day moving average around 82.44, which dollar/yen has held above on a closing basis since early February. FOCUS ON U.S. DURABLE GOODS The euro pared early losses to trade flat at 110.79 yen , below a 4-1/2 month high of 111.43 yen hit last week on trading platform EBS. The common currency rose 0.3 percent against the dollar to $1.3360, near a one-month high of $1.3386 hit on Tuesday. Dovish-sounding comments by Fed Chairman Ben Bernanke this week have knocked the dollar as expectations are raised for another round of U.S. monetary stimulus. Bernanke said on Tuesday it was too soon to declare victory in the U.S. economic recovery, warning against complacency in policy-making as the outlook brightens. The dollar was down slightly versus a basket of currencies at 78.966 after slipping to a one-month low of 78.77 on Tuesday. It fell to a fresh one-month low against the Swiss franc on Wednesday of 0.90162 francs. U.S. durable goods data due later on Wednesday are expected to show a 1.7 percent increase in February (ex-transport) after a 3.7 percent fall in January. "To the extent that Bernanke has raised the ante on U.S. growth indicators, durable goods orders due for release this afternoon will be the market's focus," said Societe Generale in a note. Tweet this Link this Share this Digg this Email Reprints Comments (0) Be the first to comment on reuters.com. Add yours using the box above.

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