FOREX-Yen jumps on safe haven buying on Ukraine worries

Thu Mar 13, 2014 2:07pm EDT

Related Topics

* Yen rises after U.S.'s Kerry hints response on Crimea vote

* Euro retreats from 2-1/2 year highs vs U.S. dollar

* Kiwi rallies on rate hike, jobs data boosts Aussie

By Richard Leong

NEW YORK, March 13 (Reuters) - The yen rose against the euro and dollar on Thursday after U.S. Secretary of State John Kerry signalled a possible response from the West if a referendum in Ukraine's Crimea region goes ahead on Sunday.

Kerry's comments before Congress, together with a warning by Ukraine's acting president Oleksander Turchinov of a possible Russian invasion, rekindled fears of a war breaking out in the region. This led anxious investors to dump stocks and risky assets in favor of the yen, Swiss franc and other perceived safe-haven investments.

"You saw a bid for yen on Kerry's comments. It crystallizes the idea that on Monday there could a serious response," said Lou Brien, market strategist with DRW Trading in Chicago.

The United States and the European Union will respond on Monday with a "serious series of steps" against Russia if a referendum in Ukraine's Crimea region goes ahead on Sunday, Kerry told a congressional hearing.

Ukrainian acting president Turchinov told a local television station Russian forces were concentrated on the border "ready to invade," but he believed international efforts could end Moscow's "aggression" and avert the risk of war.

The yen was up nearly 1 percent against the dollar at 101.75 yen after hitting a one-week high at 101.70 in midday U.S. trading. It gained 0.9 percent versus the euro at 141.53 yen after touching a one-week peak.

Safe-haven bids also benefited the Swiss franc, which reached a near 2-1/2-year high versus the greenback at 0.8731 franc. It strengthened 0.2 percent against the euro at 1.213 francs.

The euro turned flat against the dollar, last at $1.3904. Earlier, gains propelled the common currency to a 2-1/2-year high against the greenback. Escalating conflict in Crimea and possible ripple effects on Europe overshadowed optimism that the region has put recession and its debt crisis behind.

KIWI, AUSSIE REBOUND

Among other major currencies, the New Zealand and Australian dollars surged before worries about Ukraine reduced their gains.

The kiwi had risen to its strongest against the dollar in 10 months after the New Zealand central bank hiked interest rates, and signalled more to come, as its economy has gained traction. Surprisingly strong employment data lifted the Aussie by more than 1 percent against the greenback.

The kiwi and Aussie currencies suffered earlier this week on a dramatic selloff in copper and other commodities due to growing concerns over the Chinese economy, a major driver of demand for Australia's huge mining sector.

The latest Chinese economic data was lukewarm at best. Industrial output missed market expectations, and growth in retail sales also fell short of forecasts.

"The numbers out of China were not impressive by all means, but it was not bad enough for players to create big fresh 'risk off' positions - thus currency reaction was limited," said a trader at a large Japanese bank in Tokyo.

Earlier the Reserve Bank of New Zealand (RBNZ) delivered a widely expected interest rate hike and flagged that a further 100 basis points of tightening was possible this year.

That pushed the New Zealand dollar up to $0.8607, its highest since May 2013 before easing to $0.8552, up 0.3 percent on the day. The kiwi turned weaker against the yen at 87.05 after setting fresh six-year high earlier.

"Today's communication strongly suggests the RBNZ will be on the front foot for the next few meetings," Michael Turner, strategist at RBC in Sydney, said.

In the meantime, the Australian government reported 47,300 jobs were created in February, more than double market forecasts.

The Aussie was last up 0.6 percent at $0.9040 halving its earlier gain against the U.S. dollar.

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