LONDON, Aug 17, 2007 (Thomson Financial via COMTEX) -- The yen reversed some of its earlier steep across-the-board gains after hitting a fresh 14-month low against the US dollar, with analysts citing Japanese investor buying and speculation of possible Bank of Japan intervention.
The yen has witnessed sharp increases in recent days as the credit crunch crisis sparked a massive flight from risk and caused carry trades to unwind. Carry trades are a risky strategy -- popular until recently -- where money is borrowed in low-yielding currencies in order to invest in higher-yielding assets elsewhere.
Given the level of risk aversion that has flooded the market, however, any rebound is unlikely to be maintained, merely encouraging investors to move back in and buy the yen on dips.
"The inability to sustain the highs is not a reflection of the yen but more a reflection of the volatile markets we currently trade within," said Matthew Foster-Smith at Thomson IFR Markets.
Analysts also noted speculation that the Bank of Japan could intervene to stem the yen's rise. Reports have already emerged that the BoJ could hold off from raising interest rates again for the time being.
"In the short-term, yen weakening intervention has become a strong possibility as it would help stabilising international capital markets and would allocate liquidity to where it is mostly needed," BNP Paribas analysts said.
The reversal of the yen's gains also allowed some reprieve for high-yielding currencies, including the Australian dollar and the pound, but this again is expected to be short-lived.
"While the sharp sell-off over the last two days imply that a bounce in the pair (Australian dollar/US dollar) is possible, investors seem nervous and happy to unwind their long Australian dollar positions," BNP Paribas said.
The Australian dollar's steep declines over recent days have prompted action by the Reserve Bank of Australia, which announced it had intervened to stem the losses. RBA governor Glenn Stevens said intervention was small and that the central bank is prepared to intervene "from time to time" if conditions are "disorderly".
Meanwhile, focus this afternoon will centre on the release of the latest US University of Michigan consumer sentiment index, which could provoke more interest than usual given the high sensitivity of US consumers to developments on financial markets.
"It will be interesting to see whether the recent slide in equity markets and, for that matter, house prices have already started to weigh on consumer confidence with the preliminary University of Michigan index due this afternoon," analysts at WestLB said.
London 1209 GMT
London 0820 GMT
US dollar
yen 113.76 up from
112.67
sfr 1.2064 down from 1.2091
cad 1.0711 down from 1.0759
Euro
usd 1.3461 up from
1.3417
stg 0.6791 down from 0.6802
yen 153.09 up from
151.20
sfr 1.6244 up from
1.6223
Sterling
usd 1.9818 up from
1.9719
yen 225.25 up from
222.27
sfr 2.3907 up from
2.3841
Australian dollar
usd 0.7811 up from
0.7771
stg 0.3940 up from
0.3938
yen 88.74 up from
87.62
New Zealand dollar
usd 0.6825 up from
0.6749
yen 77.50 up from
76.27
COPYRIGHT
Copyright AFX News Limited 2007. All rights reserved. The copying, republication or redistribution of AFX News Content, including by framing or similar means, is expressly prohibited without the prior written consent of AFX News.
No comments:
Post a Comment