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FOREX-Yen drops to 7-mth low vs dollar; euro pressured
February 22, 2012 / 9:42 AM / 6 years ago

FOREX-Yen drops to 7-mth low vs dollar; euro pressured

* Yen falls to 7-month low versus dollar of 80.30 yen

* Technical resistance to dollar gains seen around 80.94 yen

* Euro zone services PMI disappoints, Greece concerns persist

By Nia Williams

LONDON, Feb 22 (Reuters) - The yen hit a seven-month low against the dollar on Wednesday and looked set to remain on the defensive after recent monetary easing from the Bank of Japan, while the euro struggled to make headway against the greenback following Greece’s bailout deal.

The single currency also came under pressure from a euro zone services sector flash PMI survey that fell more than expected to 49.4, below the 50 level that signifies contraction, raising concerns the region may slide into recession later in the year.

The dollar hit a session high of 80.30 yen, its highest level since mid-July with traders citing buying by Japanese importers and offshore players.

The yen has been under pressure since the BoJ’s surprise move to boost its asset buying programme last week. Some analysts said the move could mark the end of the yen’s long-term uptrend that prompted Japanese authorities to intervene in the currency market three times last year.

Comments from a Japanese Ministry of Finance official, that market speculation which could contribute to the yen’s rise was persisting and Japan would respond appropriately, added to broad yen weakness.

The euro rose to a three-month peak against the Japanese currency of 106.33, its highest since mid-November.

“I find it quite notable that the (Japanese) move to increase the amount of quantitative easing has had a far more sustained effect than the shock and awe of intervention,” said Simon Derrick, head of currency research at Bank of New York Mellon.

“Technicians out there might argue we have broken the (dollar) downtrend from summer 2007.”

The dollar has risen roughly 5 percent against the yen so far in February, putting it on track for its biggest monthly percentage gain since March 2010. Further gains could be slow, with exporters looking to sell into a stronger dollar.

Technical charts showed the dollar facing strong resistance from the top of the weekly Ichimoku cloud around 80.94 yen, after moving above the bottom of the cloud at 79.73 yen.

The dollar has not managed to stay above the weekly Ichimoku cloud for any sustained period since mid-2007, and a breach of that resistance could give the dollar additional momentum against the yen.

In addition to the BOJ’s monetary easing, the yen has come under pressure this month after data showed that Japan’s current account surplus -- a major and constant support for the yen -- fell to a 15-year low last year.

“The yen is also likely facing some downward pressure in the near-term from the rising price of Brent crude oil which is resulting in a deterioration in Japan’s terms of trade,” said strategists at Bank of Tokyo-Mitsubishi in a note.

GREECE CONCERNS PERSIST

The euro retreated from near two-week highs hit against the dollar the previous day as optimism over the long-awaited Greek bailout deal reached early on Tuesday gave way to concerns about economic growth and implementation risks.

The euro was down 0.1 percent at $1.3221, from Tuesday’s high of $1.3293, its highest level since Feb. 9. It faces resistance at $1.3306, the 100-day moving average.

“The euro had priced in a lot of the good news, in the sense that it had priced in already some form of agreement. It’s not surprising to see it struggling to break higher,” said Mitul Kotecha, head of global foreign exchange strategy for Credit Agricole in Hong Kong.

While Greece’s aid package helped to ease fears of an immediate default, the country’s economic outlook remained clouded and threatened to derail its efforts to meet tough cost-cutting measures.

Parliaments in three countries that have been most critical of bailouts - Germany, the Netherlands and Finland - must now approve the package, raising concerns it will be held up.

The growth-correlated Australian dollar was last down 0.1 percent at US$1.0652, weighed by data showing that China’s manufacturing sector contracted in February for the fourth straight month..

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