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FOREX-Dollar, yen gain as risky positions cut, euro down

Published 01/15/2010, 01:52 AM
Updated 01/15/2010, 01:54 AM
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EUR/JPY
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* Risky positions cut as economic outlook remains uncertain

* Euro slides after stops hit, fund sales, rumour on Merkel

* Aussie, C$ give up earlier gains and fall

By Satomi Noguchi

TOKYO, Jan 15 (Reuters) - The dollar and yen rose on Friday and the euro fell, along with higher yielders such as the Aussie, as investors were cautious of building riskier positions while the global economic outlook remains uncertain.

The euro hit its lowest point in three weeks against the yen and four months against the pound, with traders citing model fund selling, stop-loss triggers, fiscal concerns and a rumour, later denied, that German Chancellor Angela Merkel might resign.

Earlier, currencies leveraged to global growth, such as the Australian and Canadian dollars, were firmer after upbeat earnings from technology bellwether Intel Corp encouraged some investors to add positions in risky assets.

But others sold those currencies after weaker-than-expected U.S. retail data for December and higher jobless claims which failed to reinforce optimism about economic growth and cemented a view that U.S. interest rates are likely to stay low for some time.

"The overall tone is still risk-on, but there is still a lack of clarity about the path ahead and the currencies are reacting to that lack of clarity," said Mitul Kotecha, global head of FX strategy at Calyon in Hong Kong.

"Do you continue to buy Aussie, kiwi and sell the yen on risk appetite? The market's not fully convinced about this."

The Australian and New Zealand dollars fell about 0.6 percent against the low-yielding yen after gaining the previous day, while the euro shed about half a percent to 131.40 yen and 88.31 pence.

The euro also hit stops below $1.4450, and at one point fell as far as $1.4406 on trading platform EBS.

It trimmed some losses after a German government spokesman said rumours that Merkel might resign were completely without foundation, but it was still down 0.5 percent to $1.4430.

Analysts said concerns about Greece's fiscal position were probably the real issue. A trader at a Japanese bank said model funds had also dumped long euro positions against the yen early on, which helped push it and the yen crosses lower.

The euro had been been under pressure after European Central Bank President Jean-Claude Trichet reiterated the importance of a strong dollar and highlighted the fiscal challenges to a number of eurozone countries.

He also mentioned Greece and said the country had much work ahead.

Investor confidence in Greece has fallen as its deficit has ballooned and credit ratings have been cut, weighing on the euro in the past couple of months.

The U.S. dollar index rose 0.4 percent to 77.049, although the euro's fall against the yen dragged the U.S. currency down 0.1 percent on the day to 91.10 yen.

"The market is just stuck in a range after the weak data further complicated market views about higher rates in the U.S.," said a senior sales trader for a Japanese bank.

The Australian dollar fell 0.5 percent to $0.9273, after rising to a two-month high of $0.9331 the previous day.

The Canadian dollar also fell after hitting a three-month high at C$1.0225 the previous day. Both Australia and Canada are big commodity exporters and their currencies tend to advance when investors grow optimistic about global growth. (Additional reporting by Charlotte Cooper; Editing by Hugh Lawson)

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