AFX: The Yen falls sharply against the Euro as stocks rise
The yen fell, heading for a fourth weekly decline against the euro, as shares rallied on speculation the global credit crisis is easing, damping demand for the Japanese currency as a refuge. The euro was poised for a gain versus the dollar this year after European Central Bank council member Yves Mersch said he doesn’t see deflation risks in the 16-nation region, tempering concern policy makers will cut interest rates.
“Emerging signs of a rebound of stocks are improving the appetite for risk” and weakening the yen, said Yasuhide Yajima, senior economist in Tokyo at NLI Research Institute Ltd., a unit of Japan’s second-largest life insurer. “Growing confidence is prompting capital inflows into the currencies of resource-rich nations and emerging markets.” The EUR/JPY is currently trading at 127.20 as of 8:40am, GMT.
The franc declined against the dollar today of the 16 most-traded currencies after the Swiss National Bank said yesterday it began buying currencies in its first solo intervention in foreign-exchange markets since 1992. Switzerland’s central bank is “implementing this intention” to buy foreign currency to weaken the franc, spokesman Werner Abegg said when asked whether the SNB was already intervening. The SNB also halved the target lending rate to 0.25 percent, and said it will buy corporate bonds, a practice known as quantitative easing. “This move by the SNB will have a knock-on effect to other markets,” analysts led by Hans-Guenter Redeker, London-based global head of currency strategy at BNP Paribas SA, wrote in a research note yesterday. “Japan is in a similar position to Switzerland, with the economy contracting sharply.” The USD/JPY is currently trading at 1.1860 as of 8:50am, GMT.
The Australian and New Zealand dollars rose as stocks worldwide rallied after Japan and China signaled further stimulus measures, prompting speculation investors will buy higher-yielding assets. The currencies gained for a second straight week as prices of commodities, which account for more than half of the South Pacific nations’ exports. “The acute pessimism that had been priced into the markets is being retracted a little, with commodities drifting up and bank stocks rising,” said Tony Allen, head of currency trading at ANZ National Bank Ltd. in Wellington. The Australian dollar may rise toward 66.20 cents and New Zealand’s to 53.40 cents in the next few days, he said. The AUD/USD is currently trading 0.6590 as of 9:10am, GMT.
