Reuters: US Dollar Report: FOREX-Yen slips as Nikkei regains some stability

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FOREX-Yen slips as Nikkei regains some stability May 28th 2013, 08:48 Tue May 28, 2013 4:48am EDT * Nikkei's rebound relieves yen bears * Dollar/yen stays above key technical support levels * Dollar also underpinned by expectations Fed will taper QE By Anooja Debnath LONDON, May 28 (Reuters) - The yen slipped on Tuesday as Japanese shares steadied from sharp falls, easing worries that investors may have to close their yen-selling positions to make up for losses. While the Nikkei's fall of more than 10 percent from its 5 1/2-year peak pulled the yen higher against the dollar, in the longer term, markets still expect the Bank of Japan's aggressive easing stance to weaken the yen. The dollar rose 1.2 percent to 102.20 yen, up more than a full yen from a two-week low of 100.66 hit on Friday and staying above technical support levels, at 100.80 yen on Tuesday and breaking through resistance at 102.00 yen. Japan's Nikkei share average lost more than 7 percent last Thursday, its largest intraday drop since mid-March 2011. This buoyed currencies which gain in times of financial uncertainty, mainly the yen and Swiss franc. The Nikkei was last up 1.2 percent on the day, recovering from a three-week low hit earlier on Tuesday. "The yen and Swiss franc have dropped noticeably this morning essentially because risk assets seem to be stabilising," said Alvin Tan, currency strategist at Societe Generale in London. Tan said although they forecast the dollar to touch 108 yen by the end of the year, he thinks this move lower in the yen could be a knee-jerk reaction. "We are bearish yen for the year... but near term we are concerned that the risk-off sentiment can extend further and so the yen can strengthen in the very near term." Against the yen, the euro also gained 1.1 percent to 131.88 yen, pulling away from Thursday's trough of 129.95. Like the Japanese currency, the safe-haven Swiss franc also fell against the dollar and the euro. The dollar was up 0.7 percent against the Swiss franc at 0.9697 francs, while the euro was up 0.5 percent at 1.2515 francs. Expectations that the U.S. Federal Reserve is ready to scale back its massive stimulus programme have helped support the dollar. The euro was down 0.2 percent at $1.2910 against the dollar, trading well within its recent range of $1.28-1.32. Some strategists, however, expect the euro to slip lower "We expect euro/dollar to re-test the $1.28 area with a move below here opening the way for a decline towards our $1.2665 target," analysts at Morgan Stanley said in a note. The Australian dollar struggled, with the market still betting on yet more interest rate cuts given slower growth in the country's single biggest export market, China. The Aussie ticked up 0.4 percent to $0.9673, after a test to the downside was blocked by option-related bids just under $0.9600, but it still stayed close to the 2012 nadir of $0.9581. A break there would take it back to lows not seen since October 2011. It has fallen 9 percent from a high of $1.0583 set just last month. Link this Share this Digg this Email Reprints

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