* Yen hit multimonth highs versus many major currencies
* Disappointing U.S. ISM data sparks rout in risk demand
* RBA set to keep rates steady, attention on easing bias and
By Ian Chua
SYDNEY, Feb 4 The yen hovered at two-month highs
against the euro and dollar early on Tuesday, having powered
higher as a selloff in risk assets forced investors to cover
bearish positions in the low-yielding Japanese currency.
Disappointing U.S. data that showed manufacturing activity
slowed sharply last month dealt a heavy blow to markets already
jittery about a selloff in emerging markets.
"A poor ISM manufacturing print exacerbated growth fears and
further directs attention to the non-farm (U.S.) payrolls due at
the end of this week, after the December release's dismal
showing," analysts at JPMorgan wrote in a note to clients.
As Wall Street's benchmark stock indexes suffered falls of
over 2 percent, the dollar skidded to 100.77 yen, while
the euro slumped to 136.37 yen, both touching lows
not seen since late November. The dollar last stood at
101.03 yen, while the euro was at 136.64.
Safe-haven flows to Treasuries dragged down U.S. 10-year
note yields by a sharp 10 basis points to 2.57 percent
, further undermining the U.S. dollar's yield
Sterling fell an eye-catching 1.8 percent against the yen to
164.26, further weighed by profit-taking after a
survey showed British factory activity eased slightly in
Just last month, the pound was flying at five-year highs
against the yen. It also hit a 2-1/2-year peak on the U.S.
dollar, fuelled by optimism the UK economy was recovering well.
Traders said the selloff last night encouraged investors to
take aim at high-flying currencies.
Against other major currencies, the U.S. dollar was mixed.
It slipped on the euro, but firmed against sterling
and was little changed versus the Canadian and
The Aussie last traded at $0.8752, having retreated from a
two-week peak of $0.8834. Its immediate fortunes depend on the
outcome of the Reserve Bank of Australia policy review due at
Analysts polled by Reuters were unanimous in expecting no
change in the 2.5 percent cash rate although some expect the RBA
could drop its easing bias.
"That may lead rate markets to reconsider pricing in a
future rate hike," analysts at BNP Paribas said.
Debt and swap markets are giving a mere 4 percent chance for
a quarter-percentage-point cut and have 4 basis points of hikes
priced in over a 12-month period.
Investors also want to see if the RBA reiterates that the
local dollar is still "uncomfortably high", or whether the
latest fall in the currency has brought it more in line with the