FOREX-Yen resumes slide, Aussie also feeling the heat

Tue Jan 14, 2014 9:33pm EST

Related Topics

* U.S. dollar recovers as retail sales halt slide in U.S. yields

* Yen, Australian dollar among biggest casualties

* Canadian dollar hits 4-year low

By Ian Chua

SYDNEY, Jan 15 (Reuters) - The yen and Australian dollar nursed heavy losses early on Wednesday, having suffered a swift turnaround in fortunes after upbeat retail sales data halted a slide in U.S. yields to help the U.S. dollar recover from a one-month low touched on Monday.

Traders said the retail numbers helped offset Friday's disappointingly soft payrolls and halted a two-day slide in U.S. Treasury yields. That in turn gave the greenback a shot in the arm.

The dollar was quoted at 104.31 yen, up slightly on the day, building on Tuesday's recovery, when it rallied more than 1 percent against the yen to pull away from a near one-month trough of 102.85.

"What's notable yesterday was that the dollar/yen rose in spite of falls in Japanese shares. U.S. stocks rebounded as well and emerging currencies such as the Thai baht and the Indonesian rupiah are also rebounding or bottoming out. All of these point to favourable risk environment for the dollar/yen," said Osamu Takashima, chief FX strategist at Citigroup Global Markets in Tokyo.

Also helping underpin the dollar, two of the Federal Reserve's most hawkish policymakers who take up voting power this year said the central bank should bring its bond-buying program to a swift close.

Investors quickly brought forward the likely timing of the first Fed rate hike to August 2015 , having only just pushed it out towards the back end of 2015 in the wake of Friday's jobs numbers.

"As a result, the USD came back to life and managed to regain ground against the majors," said Stan Shamu, market strategist at IG in Melbourne.

The euro also retreated from a two-week high just shy of $1.3700 hit on Tuesday to trade at $1.3637, down 0.3 percent from late U.S. levels.

The common currency, however, also regained some footing against the yen to stand at 142.32 yen.

Another standout currency was the Australian dollar, which slid nearly 1 percent to $0.8965, reversing a move towards 91 U.S. cents early in the week.

There has been little conviction to push the Aussie higher despite a 14-plus percent drop in 2013 as the country's central bank has maintained an easing bias and encouraged a weaker currency to spur the economy.

Traders said any strength in the Aussie was due more to investors covering short positions rather than bullishness.

The Canadian dollar also hit four-year lows against the U.S. currency, extending its losses after dismal Canadian employment report on Friday fueled expectations the Bank of Canada will maintain its recent dovish stance.

The Canadian dollar dropped as much as about a quarter of a percent in Asia to C$1.0975 per U.S. dollar, its weakest level since September 2009.

The focus in Asia on Wednesday is likely to be on equities amid an absence of major market moving data. Among emerging market currencies, Indian inflation data will be in focus .

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