April 22, 2013 / 2:51 AM / 5 years ago

FOREX-Yen bears in driving seat after G20, USD/JPY targets 100

* Dollar/yen reaches 99.90 yen in thin early Asia trade

* Option barriers still protecting 100 yen for now

* Aussie dollar stable after biggest weekly fall in nearly a year

By Ian Chua

SYDNEY, April 22 (Reuters) - The yen started the new week under pressure, with the dollar just a whisker away from the elusive 100 level, after the Group of 20 countries stopped short of criticising Japan’s reflationary policies that have significantly weakened its currency.

The dollar climbed 0.3 percent from late New York levels to 99.83 yen, having risen as high as 99.90 in early Asian trade on Monday.

It was within striking distance of a four-year high of 99.95 set on April 11 and the psychological 100 level, where option barriers are said to be lined up. A break there could trigger stop-loss buying and target 100.20/30, traders said.

Data last Friday showed currency speculators raised their bets against the yen in the week ended April 16, while lifting positions in favour of the U.S. dollar.

In a communique after a two-day meeting, the G20 simply said it would be “mindful” of possible side effects from extended periods of monetary stimulus, without singling out Japan as some in the markets had feared.

Finance Minister Taro Aso said Japan’s radical economic policies have led to a cheaper yen but only as a by-product of stimulus steps to pull the country out of deflation.

“The G20 reiterated the call to avoid competitive devaluations of currencies and said monetary policy should be aimed at domestic price stability,” said Vassili Serebriakov, strategist at BNP Paribas.

“This could be seen as a ‘green light’ for the BOJ that should be easily able to justify current policy on the grounds that it fights entrenched deflation.”

Many market players expect the BOJ’s massive bond buying to force real-money Japanese investors such as life insurers to shift more funds to higher-yielding foreign bonds but some market players said there is room for disappointment.

“The market is getting slightly ahead of itself in terms of anticipating the flows out of Japan,” said Christopher Brandon, managing director for Rhicon Currency Management, a Singapore-based fund with about $350 million in assets under management.

“A move to say, sort of 105 or thereabouts (in the dollar/yen) is very much on the cards... However, I think it would probably entail a broader dollar appreciation across the board to see dollar/yen go higher than that,” he added.

The euro also rose against the yen, reaching 130.74 from around 129.98 late in New York on Friday. It was nearing a three-year peak of 131.10 set earlier in the month.

Against the dollar, the euro ticked up slightly to $1.3078 after pulling back from a session high of $1.3130 on Friday. The euro, which failed to break above $1.3200 recently, has been stuck in a $1.3000/3200 range in the past week or so.

Political uncertainty in Italy had kept a lid on the euro but the country’s re-election of a president on Saturday has raised the prospect of an end to the two months of political stalemate that followed a general election.

The common currency had also been hamstrung by persistent talk of an interest rate cut by the European Central Bank. ECB Governing Council member Ewald Nowotny on Saturday said it was too early to judge whether a cut is needed.

After a horror week for commodity currencies, the Australian dollar last stood at $1.0304., up 0.2 percent on the day but still not far off a one-month trough of $1.0268 plumbed on Thursday.

It skidded more than 2 percent last week, suffering its biggest weekly decline in nearly a year, after disappointing Chinese growth data and a rout in commodity prices led by gold took a heavy toll on the currency.

Aussie dollar bears will be watching with interest HSBC’s early report on China’s manufacturing activity for April due on Tuesday as well as Australia’s consumer inflation data on Wednesday.

Fresh signs of weakness in the Chinese economy, Australia’s single biggest export market, will no doubt fuel more selling in the Aussie dollar.

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