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FOREX-Yen firmer as stocks fall, emerging market rout deepens
August 20, 2013 / 7:41 AM / 4 years ago

FOREX-Yen firmer as stocks fall, emerging market rout deepens

* Yen advances as stocks drop, emerging currencies sell off

* Near-term focus on Fed minutes due Wednesday

* Kiwi falls after RBNZ comments on overvalued currency

By Anirban Nag

LONDON, Aug 20 (Reuters) - The yen rose on Tuesday as global shares retreated and emerging market currencies endured another wave of selling, driving investors to seek more liquid and safe-haven currencies.

The yen which is most sought-after during times of heightened financial market stress or economic uncertainty has an inverse correlation with stocks, particularly Japan’s benchmark Nikkei share average, which fell 2.6 percent.

Recent weakness in global stocks along with a selloff in emerging market currencies due partly to expectations that the Fed could start scaling back its monetary stimulus as early as next month, have helped support the Japanese currency.

The yen rose against the dollar and the euro, but its gains were more pronounced against growth-linked currencies like the Australian and New Zealand dollars.

The U.S. dollar fell 0.3 percent to about 97.25 yen, while the euro was down 0.2 percent at 129.64 yen. Both the Aussie and kiwi lost more than 1 percent against the yen.

“Investors are risk averse going into the Fed minutes and until they get a clear direction we are likely to see these conditions prevail,” said Simon Derrick, head of currency research at Bank of New York Mellon.

The minutes of the Federal Reserve’s July meeting are due on Wednesday and they are likely to provide clues on whether the Fed will taper its bond-buying programme in September. The uncertainty over Fed tapering has sent 10-year Treasury yields towards 2.90 percent, their highest in two years.

“Even dollar/yen which should be gaining because of rising U.S. yields has been hit by these risk-averse conditions,” BNY Mellon’s Derrick added. “Some of the Japanese investors who have been buying overseas bonds may have turned cautious.”

Satoshi Okagawa, senior global markets analyst for Sumitomo Mitsui Banking Corporation in Singapore, said recent turmoil in emerging markets such as India, Brazil and Indonesia has also helped spur demand for the yen.

“The yen tends to attract buying when tensions in the market increase,” he said.


The euro was flat against the dollar at $1.3330, fairly immune to rising U.S. yields partly because German bond yields have also been inching up. An improvement in the euro zone economy has also helped the euro in the past few weeks.

The big mover, though, was the New Zealand dollar which lost 1.2 percent against the dollar to trade at $0.7970. It fell after the Reserve Bank of New Zealand announced home lending restrictions and said the local dollar was overvalued.

Another underperformer was the Australian dollar, which fell 0.8 percent to $0.9042. The Aussie extended its losses after minutes of the Reserve Bank of Australia’s last policy meeting were seen as dovish.

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