FOREX-Yen ends strong week with dip, euro grinds higher

Fri Apr 11, 2014 4:16am EDT

Related Topics

* Yen retreats a touch, still on track for best week in a month

* Euro inches higher, Greek deal underlines supportive flows

* Dollar index heads for biggest weekly fall in 9 months

* Aussie down 0.4 percent

By Patrick Graham

LONDON, April 11 (Reuters) - The yen fell back a third of a percent against the dollar on Friday but remained on track for its best week since the start of March as a slump in confidence in U.S. stock markets sent investors scurrying for traditional safe havens.

The Australian dollar, one of the commodity-linked currencies often seen as a proxy for optimism over the global economy, fell almost half a percent overnight as the Nasdaq U.S. tech stocks index saw its biggest daily loss since late 2011.

Dealers and strategists also pointed to a number of other risks, ranging from signals that China and Japan will be very cautious at best with the provision of any further stimulus to their economies to worries over supplies of Russian gas to Europe.

"There are a variety of factors that have weakened the mood but the fall-off in tech stocks is probably the main one," said Jane Foley, a currency strategist at Rabobank in London.

"U.S. jobs data yesterday were very strong but there is the perception that some stocks have been overbought."

The dollar traded almost 0.3 percent higher at 101.80 yen, up from this week's trough of 101.32 earlier in the session but still down around 1.5 percent this week.

The euro also inched up against the dollar to its highest since mid-March, within half a cent of this year's highs. It traded slightly higher at $1.3894 by 0745 GMT.

The single currency's resilience has been a surprise to many in markets after a European Central Bank policy meeting last week appeared to show it on the verge of the outright money-printing from which it has shied away over six years of ultra-loose monetary policy.

That it has not weakened in response seems in part due to broader flows of money into Europe. Greece's first sale of bonds since its EU and IMF bailout underlined how capital has returned to the euro zone's still struggling southern half. Orders for the sale topped 20 billion euros.

The data out of Europe, however, remains grim. Data on Thursday showed Greek consumer prices fell 1.3 percent last month and they are also falling in annual terms in Spain and Portugal. ECB President Mario Draghi, speaking in Washington restated the ECB's view that much of the falloff in inflation is due to supply-driven falls in food and energy prices rather than simply poorer demand.

"That the euro has risen recently without much resistance shows that dollar weakness is leading current currency trends," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo. "Under normal circumstances the market would not be ignoring hints from the ECB that the euro is too high."

The dollar index last stood at 79.411, down about 1.2 percent so far this week. If sustained, this will be its biggest weekly fall in nine months.

The index is now back at levels seen before March 19 when Fed Chair Janet Yellen hinted at the possibility of an interest rate hike as soon as early next year. Minutes from the Fed's March meeting released mid-week appeared to have driven home the message that the U.S. central bank is nowhere near tightening, even as it has begun to unwind its bond-buying stimulus. (Additional reporting by Ian Chua in Sydney and Shinichi Saoshiro in Tokyo; Editing by Alison Williams)

FILED UNDER: