Reuters: US Dollar Report: FOREX-Yen surges, pares initial losses after Abe's election win

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FOREX-Yen surges, pares initial losses after Abe's election win Jul 22nd 2013, 01:31 Sun Jul 21, 2013 9:31pm EDT * Japan's ruling coalition wins upper house majority * Yen dips initially but later bounces in choppy trade * Stop-loss orders add to yen's rise * Jury still out on whether Abe will push tough reforms * A$ aided by China lending rate liberalisation By Masayuki Kitano SINGAPORE, July 22 (Reuters) - The yen rose on Monday in choppy trading, having dipped initially after a big win by Japanese Prime Minister Shinzo Abe's ruling bloc in upper house elections gave Abe a stronger mandate for his reflationary economic policies. The dollar fell 0.4 percent to 100.18 yen, a sharp reversal from moves seen earlier on Monday, when it rose to 101.05 yen on trading platform EBS, the greenback's highest level since July 10. The euro shed 0.4 percent to 131.73 yen. That was down from an intraday peak near 132.47 yen, which was the euro's strongest level against the yen in about two months. Jeffrey Halley, FX trader for Saxo Capital Markets in Singapore, said Japanese players were spotted selling the dollar versus the yen this morning, adding that traders using algorithmic trading joined in with yen-buying after the Tokyo stock market's open. "This has pushed into more stop-losses on dollar/yen and euro/yen in very poor liquidity conditions," Halley said, referring to stop-loss selling of the dollar and the euro against the yen. Halley added that the short-term direction of the dollar against the yen may hinge on moves in Nikkei futures. Stronger Tokyo shares can be seen as positive for investor risk appetite and weigh on the yen, a traditional safe haven currency, and vice versa. Japan's Nikkei average was last up about 0.9 percent after having opened 1.2 percent higher. Public broadcaster NHK said early on Monday Abe's Liberal Democratic Party (LDP) and its coalition partner, the New Komeito party, had won 76 of the 121 seats up for grabs in the 242-seat upper house. "With the election now behind us, stability is expected in the Japanese political scene, facilitating Prime Minister Abe's efforts to push through structural reform, tax reform and deregulation," said Tohru Sasaki, head of Japan rates and FX research at JPMorgan Chase Bank in Tokyo. "While we believe today's result should be positive for the Nikkei index and USD/JPY, we don't expect significant and immediate market impact," he added. That was partly because the win had been priced in and partly because the Japanese parliament would likely not start debating any new policies until some time in October. Still, the victory would also strengthen the hand of Bank of Japan Governor Haruhiko Kuroda in his efforts to push massive monetary stimulus and end deflation. Kuroda, who was in Moscow over the weekend attending the Group of 20 meeting, said quantitative easing was still in its early stages but there were signs it was working. The G20 meeting ended with a pledge to put growth before austerity, seeking to revive a global economy that "remains too weak" and adjusting stimulus policies with care so that recovery is not derailed by volatile financial markets. Elsewhere, the euro edged up 0.1 percent to $1.3154. The Australian dollar rose 0.5 percent to $0.9212 after China's central bank removed controls on bank lending rates, a long-awaited move that signals the new leadership's determination to carry out market-oriented reforms. China is Australia's single biggest export market and any step to make its economy more efficient is seen as potentially positive for trade. Link this Share this Digg this Email Reprints

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