* Dollar/yen rises 1 percent, euro/yen up 1.5 percent
* Sentiment shaky after China data, Boston explosions
* Aussie recovers after sharp fall, gold still in focus
By Anirban Nag
LONDON, April 16 The yen's recent bounce ran out
of steam on Tuesday as stocks and commodities stabilised, but
investors remained wary that another rout in gold prices could
spur demand for the safe haven Japanese currency.
The yen, which is very liquid and tends to benefit in times
of stress in the global economy or financial markets, has been a
big beneficiary in the past few days after poor Chinese data, a
dramatic drop in gold prices and explosions in Boston combined
to drive investors to seek safe havens for their money.
But its recovery stalled on Tuesday with analysts saying its
medium-term trend toward more weakness remained in place after
the Bank of Japan earlier this month unveiled an aggressive plan
of monetary easing aimed at beating deflation.
The U.S. dollar rose 1 percent to 97.90 yen, though
it was still down about 2 percent from a four-year high of 99.95
yen hit last week following the Bank of Japan's $1.4 trillion
stimulus launch announced on April 4.
The euro also jumped 1.5 percent to 128.03 yen.
"We had a clear rout of positions in the past few days,"
said Paul Robson, senior currency strategist at RBS. "But any
pullback in dollar/yen is temporary and we are fairly confident
that dollar will rise against the yen in the medium term given
capital outflows from domestic Japanese investors."
Earlier on Tuesday, the U.S. currency had fallen to 95.67
yen, its lowest since April 4.
News of explosions in Boston, which a White House official
said are being treated as an "act of terror", prompted
speculators to sell the euro, the dollar and growth-linked
Traders said investors would need to see a clearer sign that
commodity prices are stabilising before their appetite for
riskier assets returns. Gold fell 9 percent on Monday, its
biggest percentage loss since 1983, spooking many traders.
Robert Rennie, head of currency strategy at Westpac said in
a note Japanese investors of gold may have been big sellers
after the precious metal hit a record high in yen-denominated
terms last week.
He added that until Japanese domestic investors, like banks,
insurance companies and pension funds step up purchases of
foreign assets, they are likely to trim their gold holdings.
The latest drop in gold came after disappointing Chinese
data, talk of large-scale selling by a big fund, and news that
the Central bank of Cyprus might sell gold reserves, though
traders are unsure exactly what has caused such a big slide.
Spot gold last stood at $1,375.10 per ounce, up more
than 1 percent on the day.
Selling in the yen has also lost momentum after a United
States currency report late last week said it would watch
Japan's policies to ensure Tokyo was not devaluing the yen to
gain competitive advantage for exports.
"Many players had positioned themselves for the dollar's
rise above 100 yen and now they were forced to dump the dollar.
But looking at the U.S. currency report, you get the impression
while the U.S. and other countries may accept the 90-95 yen
range, they don't welcome 95-100 range," said Daisuke Uno, chief
strategist at Sumitomo Mitsui Bank.
The Treasury said it would press Japan to keep its promise
to allow the market to set its exchange rate and there may be
more rhetoric on the issue at a Group of 20 meeting in
Washington from Thursday.
The euro was up 0.1 percent at $1.3055, though it
could give up some of those gains if a German ZEW survey fells
short of expectations. The economic sentiment index, due at 0900
GMT, is forecast to drop to 42 in April from 48.5, while current
conditions are also likely to take a knock.
"The data could feed into expectations that the European
Central Bank will have to do something, given weak economic
performance and low inflation," said RBS's Robson.
The Australian dollar traded up 0.6 percent at $1.0370
, after Monday's 1.8 percent fall, which took the Aussie
unit to a one-month low of $1.0291.