Yen benefits as risk aversion climbs

SYDNEY Tue Apr 10, 2012 7:27pm EDT

SYDNEY (Reuters) - The safe-haven yen hovered at multi-week highs against many currencies in Asia on Wednesday, while the Australian dollar floundered as worries about global growth took another bite at risk sentiment.

A jump in Spanish bond yields exacerbated concerns about the fragility of peripheral euro zone economies, while disappointing imports from China kept alive worries about a hard economic landing in the world's second biggest economy.

Coupled with a big fall on Wall Street and a steep fall in Treasury yields, the yen climbed across the board. This knocked the dollar to a five-week low of 80.60 yen.

Traders said talk of strong bids at 80.50/55 should provide initial support, followed by 79.50/55, the October high reached after Japan intervened to weaken its currency.

The move also came a day after the Bank of Japan kept monetary policy steady, though the Asahi newspaper on Wednesday reported the central bank would consider easing at its April 27 meeting.

The euro fell to a seven-week trough of 105.48 yen, while the Aussie plumbed 82.68, reaching levels not seen since early February. Support is seen at 82.33, the 38.2 percent retracement of its October to March rally.

"Simple momentum suggests that AUD/JPY should head for its 38.2 percent retracement of its rise since Oct 2011, which is almost exactly its 100-day moving average," said Sebastien Galy, strategist at Societe Generale.

"By then it will have entered oversold territory as we did in October. Few will be the braves to buy on a potential dip."

Not helping sentiment, the International Monetary Fund warned commodity-exporting countries should prepare for lower prices given weaker global economic activity and lower demand.

Against the dollar, the Aussie skidded to $1.0232 before regaining a bit of ground to flirt with support at around $1.0236, the 76.4 percent retracement of the late-December to late-February rally.

The euro also lost ground against the greenback, slipping to $1.3080 from Tuesday's high of $1.3145. As a result, the dollar index .DXY pushed up to 79.856 from a one-week low of 79.603.

Unsettling the single currency, Spanish bond yields rose to within a whisker of 6 percent, and German bund yields equaled their lowest-ever levels as investors opted for the safety of German debt.

That fall in German yields could make the sale of 5 billion euros of 10-year Bunds on Wednesday challenging as some investors might find them unattractive. The major focus this week, though, is on Italy's bond sale on Thursday.

There is not much major data to distract investors in Asia, leaving the general risk-averse theme largely intact. Japanese machinery orders for February and Australia's housing finance are due out this morning.

A raft of Fed speakers are scheduled for later in the day including Vice Chairman Janet Yellen who is speaking directly on the economy and monetary policy.

(Additional reporting by Reuters FX analyst Krishna Kumar; Editing by Wayne Cole)

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