The yen rose against the euro and the dollar on Thursday after US Secretary of State John Kerry signalled a possible response from the West if a referendum in Ukraine's Crimea region goes ahead on Sunday. Kerry's comments before Congress, together with a warning by Ukraine's acting president Oleksander Turchinov of a possible Russian invasion, rekindled fears of a war breaking out in the region. This led anxious investors to dump stocks and risky assets in favour of the yen, Swiss franc and other perceived safe-haven investments.
"You saw a bid for yen on Kerry's comments. It crystallises the idea that on Monday there could a serious response," said Lou Brien, market strategist with DRW Trading in Chicago. The United States and the European Union will respond on Monday with a "serious series of steps" against Russia if a referendum in Ukraine's Crimea region goes ahead on Sunday, Kerry told a congressional hearing.
Ukrainian acting president Turchinov told a local television station Russian forces were concentrated on the border "ready to invade," but he believed international efforts could end Moscow's "aggression" and avert the risk of war. The yen climbed 1.1 percent against the dollar at 101.66 yen after hitting a one-week high at 101.56 in late US trading. It gained 1.4 percent versus the euro to one-week peaks, last at 140.90 yen. Safe-haven bids also benefited the Swiss franc, which reached a near 2-1/2-year high versus the greenback at 0.8699 franc before easing in late US trading. It strengthened 0.2 percent against the euro at 1.213 francs.
The euro weakened against the dollar, last 0.3 percent lower at $1.3858. Earlier, gains propelled the common currency to a 2-1/2-year high against the greenback at $1.3967. Escalating conflict in Crimea and possible ripple effects on Europe overshadowed optimism that the region has put recession and its debt crisis behind.
Comments about exchange rates from European Central Bank President Mario Draghi further pressured the euro in late US trading, putting it on track for its biggest one-day loss against the yen in nine months. It was last down 1.41 percent at 140.84 yen. "Any material risk of inflation expectations becoming unanchored will be countered with additional monetary policy measures," Draghi said in a speech at an award ceremony in Vienna.
He added the euro's exchange rate is becoming more important among policymakers to gauge the region's price stability. Among other major currencies, the New Zealand and Australian dollars surged before worries about Ukraine reduced their gains. The kiwi had risen to its strongest against the dollar in 10 months after the New Zealand central bank hiked interest rates, and signalled more to come, as its economy has gained traction. Surprisingly strong employment data lifted the Aussie by more than 1 percent against the greenback.
The kiwi and Aussie currencies suffered earlier this week on a dramatic selloff in copper and other commodities due to growing concerns over the Chinese economy, a major driver of demand for Australia's huge mining sector. The latest Chinese economic data was lukewarm at best. Industrial output missed market expectations, and growth in retail sales also fell short of forecasts.
"The numbers out of China were not impressive by all means, but it was not bad enough for players to create big fresh 'risk off' positions - thus currency reaction was limited," said a trader at a large Japanese bank in Tokyo. The Aussie was last up 0.4 percent at $0.9023, more than halving its earlier rise against the US dollar.
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