Yen jumps, commodity currencies feel the heat

SYDNEY Wed Jun 5, 2013 7:00pm EDT

1 of 2. Euro and U.S. dollar banknotes are seen in this picture illustration taken in Prague January 23, 2013.

Credit: Reuters/David W Cerny

SYDNEY (Reuters) - The yen was sharply higher on Thursday as a rout in Japanese stocks forced investors out of popular carry trades, while commodity currencies were under fierce pressure with the Australian dollar wallowing at 19-month lows.

The moves came as a closely watched report showed hiring by U.S. firms was sluggish in May, raising the risk that Friday's non-farm payrolls could disappoint.

The dollar was at 99.14 yen, having suffered a one-percent fall overnight, while the euro stood at 129.83 after a similar-sized decline.

Commodity currencies were even harder hit with the Australian dollar skidding nearly 3 percent to a three-month low of 94.18 yen. It was last at 94.42.

Traders said the fact that Prime Minister Shinzo Abe did not announce new bold steps to stimulate the economy in Wednesday's speech further undermined stocks and led investors to unwind extremely bearish positions in the yen.

All eyes are now on the Japanese authorities to see if they can somehow staunch the bleeding in stocks, or the yen could rise a lot further.

The euro, however, advanced against the greenback, rising as far as $1.3118, a high not seen since May 9. Immediate resistance is seen around $1.3140, a level representing the 76.4 percent retracement of its May 1-17 fall.

The euro's gain came ahead of the ECB's policy meeting, where it is likely to hold off fresh action to see whether economic recovery materialises in the second half of the year as it expects.

"We see little scope for major policy developments and thus expect the euro to stay in its narrow range," said Chris Walker, analyst at Barclays Capital.

"Although the euro has largely been immune to surprises in data releases, we expect two factors to change this. First, relative rates should eventually drive EUR/USD lower. Second, the concept of negative rates provides Mr Draghi with a tool for verbal intervention."

Investors continued to sell commodity currencies, knocking the Australian dollar to a low of $0.9511 and putting it on track to test its 2011 trough of $0.9388.

The Aussie has come under renewed pressure after data on Wednesday showed the economy grew by a weaker-than-expected 0.6 percent in the first quarter.

Markets have since shortened the odds of another interest rate cut with debt futures giving a near one-in-two chance of a July rate cut.

(Editing by Wayne Cole)

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Comments (3)
bertanderson wrote:
Good news!! Unemployment is on the rise and stimulus will remain firmly in place for as long as possible. Everyone should pray for bad US economic data so the stock market will stay up….Please stop the insanity!!!!

Jun 05, 2013 9:19am EDT  --  Report as abuse
bertanderson wrote:
Good news!! Unemployment is on the rise and stimulus will remain firmly in place for as long as possible. Everyone should pray for bad US economic data so the stock market will stay up….Please stop the insanity!!!!

Jun 05, 2013 9:19am EDT  --  Report as abuse
usagadfly wrote:
Who really knows what is going on in the USA? All the figures we get are “gamed” to manipulate the markets and opinion polls.

The fact is that we have no trustworthy and reliable source of information on jobs, labor, the economy. The best source of data is the drought of decent jobs. How long has it been since you knew someone personally who got a good job? Or a young person, that is under 30, who got a good job? If they still live with their parents they do not have one.

And with all this, we simply must have war after war and need more wars right now. “Everyone” knows the situation in Syria justifies cutting social benefits at home, importing more foreigners as “necessary” labor and raising taxes on the bottom 90% of US citizens.

The fact is that both parties lie, lie, lie and represent foreigners and corporations rather than American citizens. The Government is corrupt, corrupt, corrupt. We need a Constitutional Convention to start over and to get rid of foreign and corporate control of the political process. Our current system is a bad joke.

Jun 05, 2013 9:50am EDT  --  Report as abuse
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