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FOREX-Dollar rises versus yen on Bernanke, BoJ speculation

Published 01/25/2010, 01:53 PM
Updated 01/25/2010, 02:18 PM

* Risk aversion eases as Bernanke edges closer to 2nd term

* Speculation of more BoJ easing weighs down yen

* Euro gets some support on strong Greek bond auction (Updates prices, adds comments, changes byline)

By Steven C. Johnson

NEW YORK, Jan 25 (Reuters) - The dollar rose against the yen on Monday as Federal Reserve Chairman Ben Bernanke edged closer to winning support for a second term, which helped ease anxiety among investors.

Adding to pressure on the yen was speculation the Bank of Japan may announce new measures to loosen monetary policy, including buying government bonds to support the economy.

Strong demand at a sale of Greek five-year debt reduced concerns about fiscal problems in the euro zone, lending the euro some modest support against the dollar.

U.S. stocks rose, snapping a three-day losing streak sparked last week by fears the U.S. Senate may not confirm Bernanke for a second term and by White House proposals to limit some types of risk-taking at financial firms.

The dollar, which rallied late last week as nervous investors cut holdings of higher-yield, higher-risk currencies and assets, turned lower against most major currencies Monday.

"It was probably a relief for investors to have the weekend after three down days for stocks and high-risk currencies," said Andrew Wilkinson, senior analyst at Interactive Brokers Group in Greenwich, Connecticut. "The dollar put in a big move last week so naturally was going to struggle a bit today."

The dollar rose 0.4 percent to 90.23 yen. The BoJ is seen keeping interest rates steady, but investors were watching for any hints of additional easing measures, which would undermine yen demand among foreign investors. [ID:nTOE60K08J]

"People are concerned about what they might do given the state of the economy and the new finance minister," said Meg Browne, currency strategist at Brown Brothers Harriman.

Against the dollar, the euro was up 0.1 percent on the day at $1.4151 after touching a high of $1.4197, according to Reuters data, as bank sources said demand for the Greek issue had reached about 25 billion euros. [ID:nLDE60O11Z].

Sterling rose 0.8 percent to $1.6242 ahead of UK gross domestic product data expected to show the economy returned to growth in the fourth quarter of 2009.

Greece has been trying to convince markets it can manage its ballooning debts. The syndicated sale of five-year bonds was seen as an important test of investor demand.

Analysts said the pair was also supported as it held above its 14-day moving average around $1.4130.

The Australian dollar rose 0.4 percent versus the dollar and New Zealand's currency gained 0.5 percent.

Analysts said investors would follow developments in U.S. President Barack Obama's crackdown on U.S. banks announced last week as the market gauges its potential impact on the dollar. (Additional reporting by Wanfeng Zhou; Editing by Kenneth Barry)

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