Reuters: US Dollar Report: FOREX-Yen gains on Japan fiscal year-end, U.S. data

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FOREX-Yen gains on Japan fiscal year-end, U.S. data Mar 28th 2012, 14:12 Wed Mar 28, 2012 10:12am EDT * Japanese exporters sell major currencies vs yen * Euro inches up but stays below previous day's 1-mth high * U.S. durable goods orders below expectations By Luciana Lopez NEW YORK, March 28 (Reuters) - The yen advanced against the dollar and the euro on Wednesday on weaker-than-expected U.S. factory orders and fiscal year-end buying from Japanese exporters, though gains were seen fading next week on outlooks for ultra-loose monetary policy in Japan. The Japanese currency extended its advance against the dollar after data showed new orders for long-lasting U.S. manufactured goods rose less than expected in February and a gauge of future business investment also fell short of forecasts. "The most important takeaway from durable goods is that the recovery in the U.S. economy and the momentum is not as strong as many people had hoped," said Kathy Lien, director of FX research at GFT in Jersey City. "That's why we're seeing a bit of weakness in the dollar and a mild bit of risk aversion." The dollar fell 0.12 percent to 83.09 yen, and the euro, which had traded near flat against the yen before the data, slid 0.07 percent to 110.69 yen. Much of the expected support for the yen from repatriation flows might have come last week, when the dollar pierced the 84-yen mark, Lien said. "Around 84 was a much more attractive level," she said. "When we broke below 83 in a one-day sharp selloff, a lot of Japanese firms may have gotten nervous and did their repatriation then. I don't expect repatriation to take dollar/yen lower than 82." 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 fo r J apanese 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 its 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. John Hardy, a currency strategist at Saxo Bank in London, said bearish yen positions against the dollar had been the main theme of the quarter and investors had taken it too far heading into the Japanese fiscal year-end. "If you look at US/Japan rate spreads, they are not supportive of where dollar/yen is at the moment," he said. EURO SEESAWS AGAINST DOLLAR The euro seesawed against the dollar, weighed by comments from European Central Bank Governing Council member Jens Weidmann. 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 $1.3297 against the dollar before recovering to trade up 0.04 percent to $1.3322 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. " Link this Share this Digg this Email Reprints

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