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FOREX-Dollar, yen recover on growth, earnings worries
October 8, 2012 / 9:00 AM / 5 years ago

FOREX-Dollar, yen recover on growth, earnings worries

* Boost to riskier currencies from U.S. jobs data fades
    * Stock markets ready for earnings season
    * World Bank warns on China, Aussie dollar hits 3-month low
    * Spain tops agenda as euro zone finance ministers meet

    By Jessica Mortimer
    LONDON, Oct 8 (Reuters) - The dollar and the safe-haven yen
rose on Monday on concerns about the outlook for the global
economy and company earnings, recouping losses from the previous
session that followed strong U.S. jobs data.
    Investors were cautious as the third-quarter earnings season
gets under way and after the World Bank cut its growth forecasts
for the East Asia and Pacific region, warning a slowdown in
China could get worse. 
    The euro fell ahead of a meeting of euro zone finance
ministers as the euro zone's permanent bailout fund is launched.
Spain is expected to top the agenda at the gathering in
Luxembourg as uncertainty continues about when the country may
ask for a bailout. 
    The euro was down 0.5 percent at $1.2966,
pulling away from Friday's two-week high of $1.3072 hit after
data showing the U.S. unemployment rate fell to its lowest since
January 2009 boosted demand for riskier assets. 
    Traders said profit-taking set in on Monday, pushing the
single currency lower, although bids around $1.2950 were
expected to limit losses.
    "People did not want to add to long risk positions ahead of
the long weekend, plus we have earnings season coming up so they
are starting the week on the cautious side," said Hans Redeker,
head of global currency strategy at Morgan Stanley.
    Currency trading in the U.S. was expected to be thin on
Monday as bond markets will be closed for the Columbus Day
holiday. Share markets will be open, however.
    The higher-yielding Australian dollar -
particularly sensitive to concerns about China given the
countries' close trading links - dropped to a three-month low of
$1.0149.
    The euro slid more than 1 percent against the yen
, reaching a session low of 101.30 yen on trading
platform EBS, with traders reporting selling by a U.S.
investment bank.
    It was also weighed down by comments by German Finance
Minister Wolfgang Schaeuble on Sunday that Chancellor Angela
Merkel's trip to Greece this week did not necessarily mean
Athens would receive the next tranche of aid under its bailout.
 
    Morgan Stanley's Redeker expected the euro to pick up as the
European Central Bank's plan to buy peripheral bonds pushed down
Spanish borrowing costs. He expected chart support for the euro
from $1.2975 to $1.2945 and said Morgan Stanley expects the euro
to rise to $1.34 by year-end.
    Uncertainty over when Spain will request aid has weighed on
the common currency because it do that before the ECB can start
buying its bonds.
    The euro has climbed around 7.8 percent since hitting a
two-year low of $1.2042 in late July, bolstered by hopes for ECB
action to help quell the region's sovereign debt crisis.
    
    DOLLAR FALLS VERSUS YEN
    The dollar was up 0.3 percent against a basket of
currencies, with its index at 79.560. However, it fell
against the yen, erasing some of Friday's gains.
    The dollar was down 0.45 percent at 78.30 yen, off
Friday's high of 78.88 yen when a rise in U.S. bond yields after
the U.S. jobs data pushed it higher.
    "The impression I get is just above 79 there's a lot of
sellers," said Mitul Kotecha, head of global foreign exchange
strategy for Credit Agricole in Hong Kong. He said Friday's data
would not be enough to convince market participants that the
U.S. jobs market was headed toward a strengthening recovery.
    According to a business sentiment survey published by the
Bank of Japan last week, the average dollar/yen exchange rate
assumption that major Japanese manufacturers are using in their
business plans for the six months to March 2013 is 78.97 yen. 
    That suggests Japanese exporters may want to sell the dollar
if it rises beyond that threshold, although they are unlikely to
be active on Monday, with Japanese markets also closed for a
holiday.

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