Yen slips

The yen slipped on Friday as Asian stocks markets rebounded from a sell-off a day earlier on worries about an overheating Chinese economy, calming fears that investors could rush to unwind carry trades.
The Nikkei share average rose 0.5 percent and Hong Kong's Hang Seng rebounded 0.9 percent on relief that the Dow Jones Industrial average withstood to post a record closing high for a second day in a row on Thursday.
Recovering regional stock markets helped investors regain confidence in taking risky positions such as carry trades in which the low-yielding yen is used to buy higher-yielding currencies.
This prompted traders to trim their yen long positions made out of caution over further unwinding of carry trades. "Traders who remembered the yen's sharp rise after a stock sell-off in February were cautious enough to take yen long positions this time after a stock-sell off," said Masashi Kurabe, senior manager at Bank of Tokyo-Mitsubishi UFJ bank's forex trading.
"Those positions were closed and made the yen slide today. But traders are still wary of going straight back to carry trades." The dollar rose to 118.66 yen up 0.2 percent for the day, recovering from 117.61 yen hit on Thursday.
The euro climbed 0.2 percent to 161.50 yen crawling back from Thursday's low of 159.61 yen towards a record high of 162.43 yen struck earlier this week. The single currency hit a two-year high of $1.3629 against the dollar in early Asian trade before retreating to $1.3615 as expectations that the European Central Bank will boost interest rates in the coming months supported the single currency.
Many traders believe the yen will resume its weakening trend once global stock markets stabilise as worries over China's overheating economy fade. "Global equity markets will likely resume their rise, investors will return to the yen carry trade and the yen is likely to keep depreciating as a result," said Tohru Umemoto, foreign exchange strategist at Barclays Capital. Investors have pushed down the yen to a decade low against the Australian dollar and 17-year low versus the New Zealand dollar earlier this week.