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FOREX-Yen rises after Japan plays down foreign bond buying talk
February 19, 2013 / 12:55 AM / in 5 years

FOREX-Yen rises after Japan plays down foreign bond buying talk

* Aso says not considering foreign bond buying by BOJ

* Dollar/yen failure to clear 33-month high points to solid resistance

* Uncertainty on next BOJ Governor may curtail yen selling

* Euro soft after Draghi repeats wariness over appreciation

* Dollar/yen down 0.4 pct

By Hideyuki Sano

TOKYO, Feb 19 (Reuters) - The yen rose on Tuesday after Japanese ministers played down talk of foreign bond buying by the country’s central bank, a day after Prime Minister Shinzo Abe said such a policy could be one option for monetary easing.

Finance Minister Taro Aso told a news conference that he was not considering foreign bond purchases while Economy Minister Akira Amari said Abe’s comments on Monday simply referred to policy options countries have in general.

Their comments sent the dollar down 0.4 percent to 93.60 yen , pushing it away from a 33-month high of 94.47 yen set last week.

While sentiment towards the yen is weak, the dollar has hesitated to test that high, due in part to selling by option players hedging their barrier option positions at 94.50 yen.

“The fact that the dollar/yen couldn’t break above last week’s high yesterday points to the strength of the resistance,” said Teppei Ino, currency analyst at the Bank of Tokyo-Mitsubishi UFJ.

Some strategists also said the yen’s fall could lose momentum for now as investors became wary of betting on further yen weakness until there is more clarity on the next Bank of Japan governor.

There are rising expectations that an announcement on the BOJ’s top job will be delayed until next week, after the top Japanese government spokesman indicated on Monday that it would likely happen by the end of this month.

The euro licked its wounds near a three-week low against the dollar after European Central Bank President Mario Draghi reiterated his wariness about the currency’s appreciation.

The euro stood at $1.3348, little changed from late European levels and a tad above a three-week low of $1.3306 hit last Friday. U.S. financial markets were closed on Monday for the President’s Day holiday.

Speaking before the European Parliament, Draghi said the euro’s exchange rate was not a policy target but was important for growth and stability, adding that appreciation of the euro “is a risk”.

The euro has been under selling pressure in the wake of data recently revealing a deeper-than-forecast euro zone recession and on concerns about the outcome of an election in Italy at the weekend.

Against the yen, the euro fell 0.3 percent to 125.00 yen , having lost a bit of momentum after hitting a 34-month high of 127.71 yen earlier this month.

As the euro wilted, the dollar index held firm near a six-week high of 80.727 hit on Monday. It last stood at 80.614 but faces resistance from its 200-day moving average at 80.940.

The British pound was listless near a seven-month low of $1.5440 on Monday after a comment from Bank of England policy maker that the currency may need to fall further. It last stood at $1.5467.

Sterling is also coming under pressure from recent poor data that has stoked worries over another British recession, as well as speculation that incoming BoE chief Mark Carney may take drastic easing steps akin to the policies that Japan’s government is pressuring the Bank of Japan to adopt.

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