WSJ:WORLD FOREX: Dollar Briefly Rises, But Risk Aversion Favors Yen
-- The dollar briefly rises against the yen but the gain is short-lived
-- The dollar's blip reinforces nervousness over possible intervention
-- The euro is lower against the dollar due to ongoing worries about sovereign debt problems
By Tatsuo Ito
Of DOW JONES NEWSWIRES
TOKYO -(Dow Jones)- The dollar rose briefly against the yen in Asia Tuesday amid renewed fears of currency intervention, but the ongoing worries over the euro-zone debt crisis and investors' risk aversion kept upward pressure on the yen. The euro was slightly lower against the dollar.
In late morning trade, the dollar climbed to as high as Y77.51 on stop-loss buying and a relatively large volume of purchases by commercial banks, traders said. The gains were short-lived as traders concluded the finance ministry probably wasn't behind the spike.
"Still, the move has reinforced caution over possible intervention," said a trader at Japanese trust bank. The dollar fell as low as Y76.81 in New York Monday, the lowest level since after the publicized intervention took place Oct. 31.
At 0450 GMT, the dollar was at Y77.11 from Y77.09 late New York Monday, according to EBS via CQG.
Analysts said the finance ministry might have continued conducting stealth intervention occasionally in recent days to put a brakes on the yen's rapid rally.
"There is a possibility that such intervention has been made continuously," judging from the outstanding of commercial banks' deposit at the Bank of Japan, said Kengo Suzuki, forex strategist at Mizuho Securities.
A variety of negative news about the euro-zone debt crisis and uncertainty over the debate in U.S. deficit reduction "tend to put upward pressure on the yen," Suzuki added.
Meanwhile, Citibank's Japan forex chief strategist Osamu Takashima said the Japanese monetary authorities are likely to refrain from currency intervention in a manner to push higher the dollar unless the pair falls below the Y76.00 mark.
News that Germany's ruling party said countries could exit the euro-zone voluntarily, along with a rise in Spanish bond yields Monday, has made investors risk-averse, as has a fall in the stock market.
Chancellor Angela Merkel's ruling CDU party approved a measure that would allow countries to leave the 17-nation bloc if they choose, but remain within the European Union. The vote urges Merkel to take up the measure and push for its passage among the broader EU.
The market will keep an eye on the EU's gross domestic product data for the July-September period due at 1000 GMT to see if how the region's debt crisis has affected the real economy.
The euro was at $1.3597 and Y104.86 from $1.3634 and Y105.07 in late New York Monday.
The dollar was at CHF0.9112 from CHF0.9084, and the U.K. pound was at $1.5880 from $1.5906.
The ICE U.S. dollar Index, which measures the dollar against a basket of currencies, was at 77.637 from 76.469.
Interbank Foreign Exchange Rates At 23:50 EST / 0450 GMT
