Yen, commodity currencies feel the heat in thin month-end trade

SYDNEY Wed Nov 27, 2013 6:21pm EST

A U.S. dollar note (bottom) is pictured alongside other currencies including (L-R) the Australian Dollar, Singapore Dollar, Korean Won and China's Yuan in this picture illustration taken in Washington, October 14, 2010. REUTERS/Jason Reed

A U.S. dollar note (bottom) is pictured alongside other currencies including (L-R) the Australian Dollar, Singapore Dollar, Korean Won and China's Yuan in this picture illustration taken in Washington, October 14, 2010.

Credit: Reuters/Jason Reed

SYDNEY (Reuters) - The yen languished at fresh lows against the euro and dollar early in Asia on Thursday on track for one of its worst monthly performance this year, while sterling climbed on more evidence of a stronger economic recovery at home.

Commodity bloc currencies, grouping the Australian, New Zealand and Canadian dollars, also fell heavily against the greenback after investors latched onto U.S. data showing an improving jobs market and more cheerful consumers.

Traders said the overnight session was influenced by month-end book squaring ahead of the U.S. Thanksgiving holiday. U.S. financial markets will be shut on Thursday, followed by a half-session for the U.S. bond market on Friday.

The dollar popped above 102.00 yen for the first time since May 29, while the euro came within striking distance of 139.00 yen, reaching its highest since June 2009. The greenback last fetched 102.27 yen, while the euro bought 138.83. Immediate resistance for the euro is 139.26, the June 2009 peak.

So far this month, both the euro and dollar are up nearly 4 percent on the yen.

Investors have been using the yen as a funding currency for carry trades with the Bank of Japan committed to keeping ultra-loose monetary policy to shore up growth. Indeed, a sustained fall in the yen is exactly what the BOJ wants to boost exports.

On Wednesday, BOJ board member Sayuri Shirai said the BOJ should consider expanding monetary stimulus even further if economic and price growth sharply deviates from its projections.

Against the dollar, the euro traded at $1.3574, having slipped from a one-month high of $1.3613 as dollar bulls took heart after data showed the number of Americans filing new claims for unemployment aid unexpectedly fell last week.

A reading of U.S. consumer confidence rose but a separate survey showed continued weakness in business spending on capital goods, which suggested slower economic growth in the fourth quarter.

Analysts at BNP Paribas said the overall mix of numbers is not likely to be particularly comforting for the Fed and does not support expectations for an early tapering of Fed asset purchases.

"With the U.S. dollar trading at elevated levels versus the commodity bloc and yen and mid-range versus the euro and our position indicator suggesting the market is now long USD again, risk reward does not appear attractive for USD longs coming out of the holiday," they wrote in a note to clients.

Sterling was a notable outperformer, rising to an 11-month high on the dollar after a report showed consumer and business spending was rising in the UK.

It hit $1.6331 and was last trading at $1.6285.

In contrast, the Australian dollar fell to a three-month low of $0.9065, the New Zealand dollar dipped to a 2-1/2 month trough of $0.8115, while the Canadian dollar plumbed a four-month low of C$1.0603 per U.S. dollar.

This shift is part of a great rotation in funds away from emerging market countries, and those leveraged to their demand for commodities, and toward the developed world.

For the Aussie dollar, an important quarterly reading on corporate investment due at 0030 GMT will be key to its immediate outlook. Markets are keen to see just how fast the mining boom is cooling, and whether other business sectors are stepping up to fill the gap.

Any disappointment there could see the Aussie back at 90 U.S. cents, paving the way for a retest of this year's trough at $0.8848 set in August. It last traded at $0.9075.

(Editing by Shri Navaratnam)

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