FOREX-Yen redeemed as US dollar falls by wayside, Aussie also up

Mon Jan 13, 2014 5:59pm EST

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By Ian Chua

SYDNEY, Jan 14 (Reuters) - The yen held onto broad gains early on Tuesday, having staged a solid rally against sterling, the U.S. dollar and euro following a selloff on Wall Street and a further drop in Treasury yields.

Investors were forced to unwind stretched short positions in the Japanese currency in the wake of the poor U.S. jobs numbers and as U.S. stocks posted the biggest one-day fall in more than two months.

Sterling bought 168.86 yen, having skidded 1.7 percent, while the U.S. dollar traded at 103.03 yen following a 1.1 percent drop. The euro fetched 140.80 yen after suffering a 0.9 percent slide.

"With U.S. equity indices down 1.26 percent Monday and USD/JPY sharply lower, markets in Japan could open lower Tuesday, which in turn could feedback into more pressure on USD/JPY," analysts at BNP Paribas wrote in a note to clients.

"However, bearish JPY remains a high conviction view for many market participants and we expect the pair to find buying interest ahead of 101.50."

Friday's disappointingly soft payrolls report has raised doubts about the health of the world's biggest economy, driving investors to push out the timing of the first hike in the Fed funds rate into late 2015 from mid-2015.

All that left the U.S. dollar probing two-week lows against a basket of major currencies. It would have fallen even further if not for sterling, itself a victim of recent disappointing domestic data.

The pound shed 0.6 percent to $1.6383. The euro, meanwhile, went nowhere after Friday's rally, remaining steady around $1.3670.

Along with the yen, commodity currencies emerged best dressed after last night's shakeout in New York with both the Australian and New Zealand dollars rising to around one-month highs on the greenback.

The Aussie last traded at $0.9051 after peaking at $0.9087, while the kiwi was at $0.8374, not far from an overnight high of $0.8391.

Even the down beaten Canadian dollar staged its first positive session in about a week, rising to C$1.0859 per dollar from a four-year low of C$1.0946 per dollar.

There is nothing in the way of market-moving Asian data on Tuesday, leaving the focus squarely on equities.

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