Reuters: US Dollar Report: FOREX-Dollar, euro rally versus yen as gold, U.S. stocks recover

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FOREX-Dollar, euro rally versus yen as gold, U.S. stocks recover Apr 16th 2013, 14:43 Tue Apr 16, 2013 10:43am EDT * Yen resumes weakness after sharp bounce in previous session * Euro shrugs off fall in German sentiment data * Investors eye G20 meeting this week, gold prices NEW YORK, April 16 (Reuters) - The yen tumbled against the dollar and euro on Tuesday as gold and U.S. stocks bounced back after a sharp selloff in the previous day, reducing demand for the safe-haven Japanese currency. The euro rose against the dollar, partly helped by its 2 percent jump versus the yen. Investors shrugged off data showing a sharp fall in German ZEW sentiment in April. On Monday, the yen rose from recent multiyear lows against the dollar and euro on Monday as renewed worries about global economic growth spurred traders to sell riskier investments funded by the relatively cheap Japanese currency. But on Tuesday, spot gold rebounded more than 3 percent on Tuesday after posting its biggest ever fall in dollar terms on Monday. The plunge in gold sparked a selloff across commodities and equities, with U.S. stocks plunging the most since the day following President Barack Obama's re-election. On Tuesday, major U.S. market indexes were more than 0.6 percent higher shortly after the open. "Really a retracement across the board of a lot of the moves that we saw yesterday," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange. "Fundamentals right now appear to be taking a back seat to a lot of position and order driven flows." The dollar rose Tuesday to a session peak of 98.15 yen , according to Reuters data, before pulling back slightly to 98.13 yen, up 1.5 percent on the day. On Monday, the dollar slid 1.7 percent versus the yen, the biggest one-day move since late February after weaker-than-expected Chinese and U.S. economic data and explosions in Boston prompted investors to exit riskier investments funded by cheap borrowing in the yen. Further yen losses could be limited ahead of a Group of 20 meeting this week after Washington said it would watch Japan's policies. Investors will also closely monitor gold prices and another plunge could renew demand for the most liquid currencies such as the dollar and yen. The dollar rose to a four-year peak of 99.94 yen last Thursday, but has since retreated as traders booked profits ahead of significant resistance and option barriers at 100 yen. Despite the latest bounce, analysts said the weakening yen trend stayed intact after the Bank of Japan's aggressive monetary easing. "The fundamental picture still remains supportive of a weaker yen going forward as the recent rebound over the last couple of days is unlikely to prove sustainable," said Lee Hardman, currency economist at BTMU. BTMU forecasts the dollar at 109 yen in 12 months. The dollar extended gains versus the yen after data showed U.S. consumer prices fell in March for the first time in four months, while the housing market recovery was losing momentum. The euro rallied 2.1 percent to 128.78 yen, having hit a session peak of 128.90 yen, according to Reuters data. Against the dollar, the euro rose 0.7 percent to $1.3122, with reported central bank buying. It hit a session peak of $1.3148. "The corrective pullback in euro/dollar has remained extremely limited, suggesting the uptrend is now likely to be resumed," analysts at Morgan Stanley said. "Spillover effects from the decline in gold prices are expected to remain limited on the euro. We now expect a re-test of the 1.3140 level with a move above here opening the way for gains towards the 1.3270/1.3300 target area." Traders said investors would need to see a clearer sign that commodity prices are stabilizing before their appetite for riskier assets returns. Robert Rennie, head of currency strategy at Westpac said in a note that Japanese investors in gold may have been big sellers after the precious metal hit a record high in yen-denominated terms last week. He added that until Japanese domestic investors, like banks, insurance companies and pension funds, step up purchases of foreign assets, they are likely to trim their gold holdings. The Australian dollar rose 0.6 percent to $1.0373, while the New Zealand dollar gained 1 percent to $0.8488 . Both saw steep losses in the previous session. Link this Share this Digg this Email Reprints

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