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Yen, Swiss franc firm after incidents in Ankara, Berlin

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The yen dipped only briefly after the Bank of Japan stood pat as widely expected on Tuesday, keeping much of its gains after separate deadly incidents in Turkey and Germany raised security worries in the West.

[TOKYO] The yen dipped only briefly after the Bank of Japan stood pat as widely expected on Tuesday, keeping much of its gains after separate deadly incidents in Turkey and Germany raised security worries in the West.

The safe-haven Swiss franc also held firm near six-month highs versus the euro. The US dollar was well bid after upbeat comments from Federal Reserve Chair Janet Yellen.

The US currency last traded at 117.22 yen, showing only minor price action after the BOJ maintained its twin targets of minus 0.10 per cent interest on some excess reserves and the zero per cent 10-year government bond yield.

Some players remained cautious ahead of Governor Haruhiko Kuroda's news conference at 0630 GMT, where they suspect he could strike a more hawkish tone than before, given the sharp fall in the yen since the BOJ's previous meeting.

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The US dollar had slipped as low as 116.55 yen on Monday, falling more than two yen from a 10-1/2-month high of 118.66 touched on Dec 15.

Investors were rattled after the Russian ambassador to Turkey was shot dead by an off-duty police officer as the diplomat gave a speech at an Ankara art gallery.

Security fears deepened on news that a truck ploughed into a crowded Christmas market in central Berlin, killing 12 people, evoking memories of an attack in Nice, France, in July, in which 86 people were killed.

"Given that the yen was sold the most since the US elections, it was inevitable to see some short-covering in the yen," said Masashi Murata, senior currency strategist at Brown Brothers Harriman.

Last week the yen was down about 11 per cent since the US election, edging out the Mexican peso and the Turkish lira to briefly become the worst performer after Donald Trump's surprise election victory.

Expectations that Mr Trump's planed tax cuts and fiscal spending could lead to higher US growth and inflation lifted US bond yields and undermined the yen.

"The US dollar is rising on expectations of Trump's policies and I think the rally will continue as long as there are uncertain elements to his policies," said Kazushige Kaida, head of foreign exchange at State Street.

"But markets are starting to take it as a fact, and that suggests the US dollar's rising cycle is coming near an end. Those who got on the bus first will be starting to get off," he added.

The safe-haven Swiss franc was another strong performer. It stood at 1.0689 per euro, having hit a six-month high of 1.0680 on Monday.

The US dollar remained supported against many other currencies, with the its index rising back to 103.08 from Monday's low of 102.52, coming within sight of its 14-year peak of 103.56 touched on Thursday.

The US dollar was helped in part by upbeat comments from Federal Reserve chair Janet Yellen on the US jobs market.

The euro traded at US$1.0412, having slipped 0.5 per cent on Monday and edging near its Dec. 15 low of US$1.03665, its weakest level since January 2003.

The British pound also dipped to US$1.2355 on Monday, its lowest in about a month and last stood at US$1.2383.

The Australian dollar fell to 6-1/2-month lows of US$0.7240, turning negative for the year.

The Turkish lira dropped slightly to 3.5325 to the US dollar ahead of its central bank policy announcement later in the day, but held above its record low of 3.6000 set earlier this month.

REUTERS

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