April 1, 2013 / 1:41 PM / 4 years ago

FOREX-Yen rises across the board on Chinese data, Korea tensions

* Concerns about Cyprus deal, Italian politics weigh on euro
    * Aussie slides after China PMI disappoints
    * Thin trade allows yen to firm despite BOJ easing
expectations
    * BoJ tankan: improvement in sentiment weaker than forecast

    By Gertrude Chavez-Dreyfuss
    NEW YORK, April 1 (Reuters) - The yen firmed across the
board on Monday on safe-haven flows following
weaker-than-expected Chinese factory activity and renewed
uncertainty in the Korean peninsula.
    The euro, meanwhile, was flat after approaching a four-month
low earlier on concerns about the spillover from Cyprus' bailout
terms.
    Trading, however, was thin, with many markets still closed
for Easter holidays. But the mood was cautious ahead of the
European Central Bank's monetary policy review on Thursday and
the monthly U.S. payroll data out on Friday.
    "We're seeing safe-haven flows from the Australian and New
Zealand dollars into the yen because of the weak Chinese data,"
said Ravi Bharadwaj, market analyst at Western Union Business
Solutions in Washington.
    China's official Purchasing Managers' Index (PMI) reached
50.9 in March, stopping short of market expectations of a jump
to 52 from February's 50.1. 
    The dollar fell 0.6 percent to 93.65 yen, with the
euro also sliding 0.6 percent to 120.02 yen.
    The Australian dollar also slipped 0.1 percent to US$1.0409
 while the New Zealand dollar was down 0.2 percent at
US$0.8358. 
    Tensions in North Korea also supported the yen, analysts
said. South Korea on Monday said it will strike back quickly if
the North stages any attack on its territory amid shrill
rhetoric from Pyongyang and the U.S. deployment of radar-evading
fighter planes.
    Earlier, North Korea said the region is on the brink of a
nuclear war in the wake of United Nations sanctions imposed for
its February nuclear test and a series of joint U.S. and South
Korean military drills that have included a rare U.S. show of
aerial power. 
    "The vitriolic statements from North Korea have upped the
uncertainty in the region and we're seeing the yen benefit as a
result," said Western Union's Bharadwaj.
    Investors had earlier brushed off a disappointingly narrow
improvement in Japanese business sentiment over the last quarter
shown by the Bank of Japan's tankan survey, as the focus is more
on the central bank's policy review later in the week. 
    The BoJ is widely expected to scale up its bond buying and
to extend the maturities of the bonds it purchases under new
Governor Haruhiko Kuroda.
    Bets on a radical shift in the BoJ's policy has ramped the
dollar up 20.9 percent against the yen in the last two quarters,
pushing it to a 3-1/2 year high of 96.71 yen last month.
    The euro, meanwhile, was little changed at $1.2815,
hitting a low of $1.2770, which was just above a four-month
trough of $1.2750 hit last Wednesday. Europe's common currency
has slid steadily since February, when it hit a 14-month high of
$1.3711.
    At the weekend, the Cypriot central bank confirmed that
major depositors in Cyprus's biggest bank would lose around 60
percent of savings over 100,000 euros, well above the initially
touted cut of 30 to 40 percent. 
    The euro has major support around $1.2680, a 61.8 percent
retracement of its July-February rally. But a break there could
open the way for a test of last year's low near $1.20. 
    Borrowing costs in Slovenia, seen by economists as one of
the next potential candidates for the next euro zone bailout,
jumped over 100 basis points in the wake of the Cyprus bailout,
while Italian borrowing costs reached their highest since
November at a 5-year bond auction last week. 
    Appetite for Italian debt has been hurt by the deadlock in
the country's politics since inconclusive elections a month ago,
reinforcing the common currency's weakness.
    At the weekend, President Giorgio Napolitano summoned 10
"wise men", including European Affairs Minister Enzo Moavero and
senior politicians, to propose a series of urgent measures that
could be backed by all parties. However, the move offered little
hope of overcoming the deep political divisions.

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