* Yen rises versus euro, dollar on safety demand
* Focus back on Ukraine ahead of Crimea referendum vote
* Traders wary about euro as ECB talks down exchange rate
By Richard Leong
NEW YORK, March 14 The yen rose on Friday,
poised for its biggest weekly gains in more than a month against
the euro and dollar, as traders flocked to it on growing tension
in Ukraine and fears about the health of the Chinese economy.
The euro was also under pressure since hitting a 2-1/2 year
high versus the greenback earlier this week in the wake of
comments from European Central Bank President Mario Draghi who
raised concerns about the strength of the common currency.
"I don't think anyone wants to hold any large risky
positions going into the weekend," said Shaun Osborne, chief
foreign exchange strategist at TD Securities in Toronto.
Draghi said on Thursday that the strength of the euro was
increasingly relevant to ECB's assessment of price stability -
its central goal - because of the impact on inflation, which has
strayed well below the official target.
A strong currency reduces price pressure since it pares
costs on imported goods and services.
The euro fell as much as 0.5 percent against the yen in
early U.S. trading before trimming losses to trade 0.25 percent
lower on the day at 140.88 yen.
Against the dollar, the euro rebounded from early session
losses and was 0.33 percent higher on the day at $1.3914
"We are finding good support on dips in the euro," TD's
The euro's decline this week erased much of the gains made
after the ECB held back from easing policy last Thursday despite
projecting persistently low inflation. Draghi's comment then
that the euro's strength had very little impact on imported
inflation had helped it rally broadly.
On the week, the euro was on track to fall 1.71 percent
against the yen, while it was poised to rise 0.25 percent versus
Traders said the euro is likely to keep drawing support from
the ECB's decision to keep policy unchanged, higher money market
rates, and the euro zone's large current account surplus.
NERVOUS TRADERS LOOK TO THE YEN
Traders have favored the yen in the past 24 hours as fears
about a war in Ukraine's Crimea peninsula and jitters over the
Chinese economy in the wake of that country's first private bond
default last week.
Russia launched new military exercises near its border with
Ukraine on Thursday, showing no sign of backing down on plans to
annex its neighbour's Crimea region. U.S. Secretary of State
John Kerry said serious steps would be imposed by the United
States and Europe if the referendum on Crimea joining Russia
takes place on Sunday as planned.
"The risks to global growth both from China as well as from
the Crimean situation are supporting yen," said Manuel Oliveri,
FX strategist at Credit Agricole in London.
The dollar fell 0.5 percent to 101.36 yen, retreating
from Thursday's high of 102.865. It hit 101.22 in U.S. trading
as yen bulls targeting the March 3 low of 101.20. On the week,
the dollar has lost 1.7 percent, on track for its biggest losses
since late January.
Reflecting some of the nervousness, one-week implied
volatilities in the dollar/yen pair - a gauge of how
sharp currency swings will be - rose to 8.925 percent from a low
of around 7.20 percent on Thursday.
"In the near term more risk-averse trading conditions may
continue to encourage a stronger yen," Lee Hardman, a currency
analyst at Bank of Tokyo Mitsubishi, wrote in a note.
"The Chinese economy appears to have downshifted to a slower
pace of growth in the first quarter, as evident in the weak
economic reports from February."
Chinese Premier Li Keqiang warned on Thursday that the
economy faced "severe challenges" in 2014 while expectations of
more debt defaults kept alive worries about the state of its