Yen inches up on month-end exporter buying

TOKYO: The yen nudged up broadly on exporter-led month-end buying on Friday, while the euro held onto hefty gains agains
27 Jan, 2012

The Federal Reserve's move pushed the greenback to a five-week low on the euro overnight as the US central bank surprised many by committing to keep rates low until late 2014, while suggesting further quantitative easing may be needed.

Analysts thought the dollar unlikely to stay under pressure for much longer, however, at least against the euro.

"We may see one more round of selling in the dollar, but I think everyone knows that the unresolved problems in Europe will come to the fore sooner or later, so the dollar will likely stay supported longer-term," said Sumino Kamei, a senior currency analyst at Bank of Tokyo-Mitsubishi UFJ.

Kamei said Greece continued to pose an immediate threat to the euro's recent gains as debt talks between it and private creditors resume on Friday.

Greek media reported that debt holders may be ready to accept a yield of 3.75 percent on new Greek bonds after euro zone ministers rejected an offer of 4 percent on Monday.

The euro traded at $1.3106, on track to be one of the week's best performers with a gain of 1.8 percent. It touched a high of $1.3184 Thursday but faltered short of major resistance in the $1.3199-1.3237 zone.

Meanwhile the dollar fell as low as 77.26 yen early in the session as Japanese exporters offloaded it in month-end deals. It later recovered somewhat to 77.40 yen.

Japanese companies took advantage of the higher dollar/yen rate, with the greenback having hit a two-month high of 78.29 yen earlier in the week.

Stop loss offers were detected above support at the 100-day moving average of 77.20 yen with traders in Tokyo already building new yen long positions and saying they would add to them if the dollar closed the week below the support level.

CARRY TRADE

The Fed's decision encouraged using the dollar in carry trades and sparked big gains for gold and copper. The dollar index dropped to 79.35, having broken support at 79.50 to hit its lowest in over six weeks at 79.067 on Thursday.

The move was consistent with a stimulative message coming from other big central banks.

"These central banks have huge influence over global financial market conditions and the FOMC statement adds to the potential upside for risky assets," said analysts at Barclays Capital.

That supported commodity currencies, with the Australian and New Zealand dollars hovering near three-month highs. The kiwi has been a clear outperformer this year with a gain of 5.8 percent, while the Aussie has added more than 4 percent.

The United States will release GDP numbers later on Friday with forecasts pointing to a 3 percent bounce in the October-December quarter.

Copyright Reuters, 2012

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