Reuters: US Dollar Report: FOREX-Yen falls sharply as shares advance; euro slips

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FOREX-Yen falls sharply as shares advance; euro slips May 28th 2013, 13:40 Tue May 28, 2013 9:40am EDT * Firmer equities weigh on yen and Swiss franc * ECB, BOJ policymakers reaffirm supportive stance * Euro pares losses after Italian debt auction By Wanfeng Zhou NEW YORK, May 28 (Reuters) - The yen tumbled broadly on Tuesday as global equity markets rallied on supportive comments from central bankers, encouraging investment in riskier, higher-yielding trades funded by cheap borrowing in the Japanese currency. Japan's Nikkei stock average ended 1.2 percent higher, while European and U.S. shares also advanced, reversing sharp losses seen last week after Federal Reserve Chairman Ben Bernanke stoked fears the U.S. central bank may scale back its stimulus. Strategists said markets were positioned for yen weakness on expectations of aggressive monetary easing by the Bank of Japan. They said the yen's reluctance to gain further in the face of equity selloffs suggests its weakening trend is intact. "Perhaps the most interesting aspect of the price action is the degree to which dollar/yen is holding up, despite significant position reduction into the long weekend," said Jens Nordvig, global head of FX strategy at Nomura Securities in New York. "We are just 1.5 percent away from the highs in dollar/yen, even if the Nikkei is more than 10 percent off the highs. We are sticking with our long dollar/yen position with a stop at 100.50." The dollar rose 1.2 percent to 102.14 yen, up more than a full yen from a two-week low of 100.68 set on Friday, according to Reuters data. The dollar rose to a 4-1/2-year high of 103.73 yen last Wednesday. Support is seen around 100.80 yen, while option expiries are cited at 102.00 yen, which could keep the currency pinned to these levels. Bank of Japan board member Ryuzo Miyao said on Tuesday it was vital to keep long- and short-term interest rates stable. Also on Tuesday, European Central Bank Executive Board member Peter Praet said the bank could still cut interest rates further if needed, a day after ECB Executive Board member Joerg Asmussen said the loose policy would stay as long as necessary. Lee Hardman, currency economist at Bank of Tokyo Mitsubishi, expects the dollar to touch 105 yen in 6 months and 109 yen in 12 months and sees any dips in the dollar towards the 100 yen level as an opportunity to buy the pair. "The recent strengthening of the yen has been fairly modest and we think this is more corrective in nature than a major change in trend... the underlying trend is further yen weakness," he said. The euro rose 1.1 percent to 131.83 yen, pulling away from Thursday's trough of 129.94 yen, according to Reuters data. Against the dollar, the euro dipped 0.1 percent to $1.2912, paring losses after an Italian bond auction saw its debt costs slip to their lowest level since the euro came into existence in 1999. The euro has been trading in the $1.28-$1.32 range over the last few months, but analysts expect it to slip lower on contrasting expectations for monetary policy between the ECB and the Fed. "The Fed is moving closer to tapering quantitative easing while the ECB is likely to ease monetary policy further in the coming months, that should weigh modestly on euro/dollar," Hardman said. The safe-haven Swiss franc fell, with the dollar up 0.6 percent at 0.9691 franc and the euro up 0.5 percent at 1.2516 francs. Currencies such as the yen and the Swiss franc, which rose sharply last week after a recent sell-off in stock markets, typically gain in times of financial uncertainty. Link this Share this Digg this Email Reprints

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