Japanese yen edges up higher vs US dollar

By Reuters – Global Time Source:Reuters-Global Times Published: 2018/2/12 21:03:39

Trades below peak as bounce in equities dampens safe haven demand

The Japanese yen edged higher versus the dollar on Monday, but traded below a five-month high as a bounce in US equities late last week dampened demand for traditional safe haven currencies.

The dollar eased 0.1 percent to 108.70 yen, but remained above Friday's trough of 108.05 yen, its lowest level since September 11. The dollar last week fell nearly 1.3 percent against the yen.

The yen tends to attract demand in times of market stress as the currency is backed by Japan's current account surplus, which offers it more resilience than currencies of deficit-running countries.

The US S&P 500 gained 1.5 percent on Friday, ending a wild week with a burst of buying, but still recorded the worst week in two years. Despite the bounce, investors were bracing for more volatile trading days ahead.

MSCI's broadest index of Asia-Pacific shares outside Japan rose 1.1 percent.

The yen had risen last week as global equity markets tumbled and volatility soared - moves that came after US bond yields jumped on heightened worries about inflation.

Given the focus on inflation, investors may be taking a wait-and-see stance ahead of US consumer price data due on Wednesday, said Teppei Ino, an analyst for Bank of Tokyo-Mitsubishi UFJ in Singapore.

If the US CPI data for January comes in strong and triggers a renewed rise in bond yields, that could dent equities and spur demand for the yen, Ino added.

Against a basket of six major currencies, the dollar eased 0.4 percent to 90.105 after gaining 1.4 percent last week.

Last week was the dollar's strongest against the currency basket in nearly 15 months, as some traders closed out dollar-bearish bets, while others favored the dollar in a safe haven move to exit other higher-returning but riskier currencies.

The euro edged up 0.3 percent to $1.2290. Last week, the common currency slid 1.6 percent, its worst weekly performance since November 2016, as falling risk appetites and higher volatility led investors to reduce their positions.

The euro was susceptible to such position-squaring because a popular trade before the recent market upheaval had been to buy the euro on expectations of the European Central Bank unwinding monetary stimulus.

Posted in: ECONOMY

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