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FOREX-Dollar, yen lifted by caution over stocks, earnings

Published 04/07/2009, 09:16 PM
Updated 04/07/2009, 09:24 PM

* Trade stuck in ranges before U.S. earnings, long weekend

* Yen shrugs off fall in Japanese current account surplus

TOKYO, April 8 (Reuters) - The dollar and yen rose on Wednesday as falls in share prices and worries about upcoming earnings results for big U.S. companies prompted investors to flock to their perceived safety.

The yen showed limited reaction to news that Japan's current account surplus halved in February from a year earlier as the global financial crisis took its toll on Japanese exports.

The dollar and yen, perceived as safer bets than other currencies at times of market stress, will likely keep drawing demand as investors stay away from riskier assets, dealers said.

Tokyo's Nikkei average lost 2.0 percent with banking shares under pressure after their U.S. peers fell on worries about toxic assets and ahead of the earnings season.

"The currency market moved back to risk aversion after optimism had gone a bit too far," said Yoshihisa Kanzaki, a currency dealer at Shinkin Central Bank.

"But the market overall is expected to be driven by investor position adjustments and profit-taking for the rest of this week ahead of a long weekend for many overseas players and before U.S. financial sector earnings," he said.

Japan's current account surplus fell 55.6 percent in February, slightly better than a market forecast for a 57.1 percent fall, after logging a record deficit in January.

"The data shows Japan's economy continues to deteriorate. But for the yen, returning to a surplus is a positive, because foreign investors saw last month's deficit as a reason to sell the yen," said Toru Umemoto, chief foreign exchange strategist at Barclays Capital in Japan.

The dollar rose 0.2 percent to 100.66 yen after rising to a nearly six-month high of 101.45 yen on Monday.

The euro fell 0.4 percent to $1.3215 and dipped 0.3 percent to 132.98 yen, after touching 137.42 yen on Monday, its highest since late October.

The European single currency came under selling pressure on Tuesday after data showed the euro zone economy recorded its deepest-ever quarterly fall in the fourth quarter of 2008. Higher-yielding currencies such as the Australian dollar and the New Zealand dollar were weaker.

The Aussie slipped 0.3 percent to $0.7097 and the kiwi was down 0.2 percent at $0.5744. (Reporting by Kaori Kaneko; Editing by Michael Watson)

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