FOREX-Euro firmer vs yen but stays below two-week high

Mon Aug 19, 2013 9:13pm EDT

Related Topics

* Euro firmer vs yen but stays below Monday's 2-week high

* Yen seen supported as risky assets stay wobbly

* Near-term focus on Fed minutes due Wednesday

By Masayuki Kitano

SINGAPORE, Aug 20 (Reuters) - The euro inched higher versus the yen on Tuesday, but stayed below a two-week high set the previous day as a retreat in risky assets lent support to the Japanese currency.

The euro edged up 0.1 percent versus the yen to about 130.30 yen but stayed below Monday's peak of 131.05 yen, the euro's highest level versus the yen since Aug. 5.

Against the dollar, the euro held steady at $1.3338, down from Monday's intraday high of $1.3375.

The common currency had gained a lift versus the dollar and the yen on Monday after the Bundesbank said in its August monthly report that the ECB's forward guidance on low interest rates was "not an unconditional commitment".

The comment raised expectations the ECB's next move on rates would depend on the medium-term outlook for inflation.

The ECB in July committed to keep interest rates at record lows for an "extended period".

After a lift from the Bundesbank comments, the euro later shed its gains versus the yen as the Japanese currency drew support from Monday's drop in U.S. shares, which were held back by market expectations that the Federal Reserve could scale back its monetary stimulus as early as September.

Recent turmoil in emerging markets such as India, Brazil and Indonesia also spurred demand for the yen, said Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore.

"The yen tends to attract buying when tensions in the market increase," he said.

Okagawa said the demand for yen was also offsetting the dollar-positive impact from a rise in U.S. Treasury yields and capping the dollar's moves versus the yen.

The dollar edged up 0.1 percent to 97.69 yen, staying within its recent trading range. The dollar has traded between 96.88 yen to 98.66 yen over the past week.

The U.S. 10-year Treasury yield last stood at 2.869 percent , hovering near a two-year high of 2.90 percent set on Monday.

Investors are now looking ahead to minutes due on Wednesday of the Federal Reserve's July meeting, awaiting fresh clues on whether the Fed will taper its bond-buying programme in September.

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