* Yen hits multi-month or multi-week highs
* Worries about some Portuguese banks knock equities lower
* Markets in two minds over possible impact of bank fallout
(Updates prices, adds quotes)
By Ian Chua and Shinichi Saoshiro
SYDNEY/TOKYO, July 11 The yen was poised to end
the week higher on Friday, having jumped to a five-month peak
against the euro overnight as banking woes in Portugal drove
global equities lower and lifted demand for the safe-haven
Fears over financial troubles at the family-owned holding
companies behind Portugal's largest listed bank had unsettled
European markets on Thursday.
That in turn weighed on Wall Street and there was a knock-on
effect in some Asian bourses on Friday.
The euro last traded at 137.79 yen, having fallen
as far as 137.50, its lowest since early February.
The dollar was at 101.35 yen after touching a
seven-week low of 101.06. The Aussie fetched 95.09 yen
, following a dip to a five-week low of 94.66.
"Considering we currently have record-low volatility in the
bond and currency markets, and near record-low volatility in the
equity markets, coupled with record highs in equities, the
protection of profits will take priority," said Evan Lucas, a
strategist at IG in Melbourne.
"The question that will come later is: Is this an isolated
event or is it the first chink in the chain to fire contagion
The common European currency slid as far as $1.3589
from a session high of $1.3651.
Details of Portugal's banking woes were complicated and left
markets in two minds about whether this was a bank-specific
event or something more systemic.
The fact that Wall Street managed to close off the session
low and U.S. Treasuries saw only modest bids suggested that
investors initially overreacted to the news.
"The Portuguese banking trouble appears contained, as shown
by the limited decline in U.S. stocks and with none of the
emerging market currencies falling more than 1 percent against
the dollar. It's difficult to simply label the situation 'risk
off'," said Masashi Murata, senior currency strategist at Brown
Brothers Harriman in Tokyo.
"Treasury yields and U.S. and Japanese monetary policies
remain drivers of the yen. True, the Portuguese banking woes did
strengthen the yen, but I see this more as a result of the
dollar being sold as Treasury yields fell," he added.
The Treasury 10-year note yield briefly fell to a five-week
low of 2.494 percent on Thursday before pulling back
above the 2.500 percent threshold.
In an event overshadowed by the Portuguese bank
developments, the Bank of England held interest rates at a
record low on Thursday and offered no new guidance on its policy
Sterling eased slightly on the dollar to $1.7123,
but stayed near a six-year high of $1.7180 set earlier in the
(Editing by Eric Meijer and Alan Raybould)