Reuters: Market News: FOREX-Yen momentum seen fading after jump, Europe in focus

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FOREX-Yen momentum seen fading after jump, Europe in focus Mar 30th 2012, 04:13 Fri Mar 30, 2012 12:13am EDT * Yen off peaks vs AUD, CAD, euro * EU ministers to meet to increase rescue fund * Spanish budget, China official PMI eyed By Antoni Slodkowski TOKYO, March 30 (Reuters) - The yen briefly jumped to a three-week high against the dollar on Friday as speculators bought the currency, triggering stop losses, but a lack of expected follow-through buying by businesses saw the yen edge back. Short-term players had hoped repatriation flows from Japanese exporters would boost the yen further, but most Tokyo companies have already ended their currency hedging, traders said, suggesting end-of-business-year demand for the yen is fading. The yen hit its highest level in three weeks at 81.83 yen , after tripping stops under Thursday's low of 81.90, but dollar buying by bargain hunters, including importers, saw it retreat to 82.10. "Speculators have been piling in ever since late New York trade, but many got burnt as exporter-buying was smaller than they had expected," said a senior spot trader for a major Japanese bank who did not want to be quoted by name. Even though this year's eye-watering dollar rally has lost steam over the last three weeks, the greenback was still poised to end the Jan-March quarter nearly 7 percent stronger on the yen, in a move widely seen as one of the biggest surprises of 2012 so far. "The dollar has gained on the back of improvements in the U.S. economy and lack of more turmoil in the euro zone, with the Bank of Japan providing some additional support," said Koji Fukaya, chief currency strategist in Credit Suisse in Tokyo. The dollar's rally was also bolstered by Japanese importers who bought it to fund their surging demand for fossil fuels, after most nuclear reactors in Japan went offline in the wake of the Fukushima nuclear crisis. "My sense is that the dollar will keep rising slowly against the yen in the next quarter too," said Fukaya, assuming U.S. data confirm recent positive news and China slowdown fears prove premature. The euro stood at 109.56 yen, pulling away from a trough of 108.76, its lowest in one week. Driven by its move against the dollar, the yen was a shade stronger against commodity-linked currencies with the Austalian dollar down 0.3 percent at 85.36 yen. Still, with the year-end flows losing momentum, the Aussie managed to pull away from a six-week low of 84.55 hit the day before. ALL EYES ON EUROPE With the the dollar on the backfoot, the euro jumped more than 0.4 percent to $1.3360, with the move hastened after stop losses were taken out above the previous session's high at $1.3350 and by bargain-hunting in euro/yen. The euro rose to the highest levels in almost four weeks against the dollar on Tuesday on comments from U.S. Federal Reserve Chairman Ben Bernanke, who indicated supportive monetary policy will remain in place. An initial resistance is formed by offers reported at 1.3375-85, while bids around 1.3300 could provide support, traders said. Credit Suisse's Fukaya and other strategists expect the euro zone problems to re-emerge and believe the euro will resume its decline in the coming qurter. "Europe is the biggest risk factor in the second quarter, with elections in Greece and France potentially fuelling doubts about commitments to fiscal reforms if those opposed to austeriy measures win," said Daisuke Karakama, market economist for Mizuho Corporate Bank in Tokyo. "Failure to ratify a permanent bailout fund before its scheduled launch in July could rattle financial markets," he said. Upcoming events include Spain's budget presentation, which will show how far the government will tighten its belt. A meeting of euro-zone finance ministers will also be in focus as policymakers are expected to increase the combined lending ceiling of their two bailout funds. [ID: nL6E8ET0OX] Beijing will release on Sunday its official PMI reading for March. With markets still fretting about China hard-landing concerns, the data will be closely watched to gauge the extent of the nation's slowdown. Expectations are for 50.8, slightly under February's 51. Japan's PMI for March was surprisingly strong at a 7-month high of 51.1, while household spending was also upbeat. Link this Share this Digg this Email Reprints

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