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FOREX-Yen, dollar pare losses on caution before US jobs

Published 04/03/2009, 02:08 AM
Updated 04/03/2009, 02:16 AM

* Caution ahead of U.S. jobs data lifts dollar, yen off lows

* Yen hit earlier by renewed risk appetite, accounting change

* Aussie brushes 5-½ month high vs yen, 3-month high vs dlr

By Shinichi Saoshiro

TOKYO, April 3 (Reuters) - The yen and the dollar fell to multi-month lows on Friday after G20 leaders boosted investor risk appetite, but later trimmed their losses as some caution returned ahead of U.S. employment figures due later in the day.

G20 leaders clinched a $1.1 trillion deal on Thursday to counter the worldwide economic crisis and the United States said it would change accounting rules to allow banks more flexibility in valuing toxic assets.

Both developments improved investors' appetite for risk and weighed on the Japanese and U.S. currencies on Friday, with the yen hitting a 5-½ month low and the dollar a three-month trough versus the Australian dollar in early trade.

The Japanese and U.S. currencies edged up, however, as the market began looking ahead to U.S. jobs figures at 1230 GMT.

The employment numbers are seen as a potential dampener of risk appetite, with economists in a Reuters survey expecting 650,000 jobs were lost and the unemployment rate hit a 26-year high of 8.5 percent in March.

"The yen selling was not sustainable before the U.S. jobs data release. Opinion may be tilted towards the yen weakening in the longer term, but the market would first like to see this major event through," said a dealer at a Japanese brokerage.

The dollar gained 0.1 percent to 99.65 yen after reaching as high as 100.18 yen on trading platform EBS, the first time it has pierced 100.00 since early November.

The euro dipped 0.4 percent to $1.3413, after climbing 1.6 percent in the previous session, and eased 0.3 percent to 133.56 yen after climbing to a five-month high of 134.99 yen early in the day.

The euro jumped the previous day after the European Central Bank eased less than the market was braced for, cutting rates by 25 basis points to 1.25 percent instead of an expected 50 points.

The Australian dollar fell 0.4 percent to $0.7131 after touching a three-month high of $0.7230 and slipped 0.3 percent to 70.95 yen after reaching a 5-½ month high of 72.31 yen.

The dollar index, a gauge of the greenback's strength against a basket of key currencies, edged up 0.3 percent to 84.540.

APPETITE FOR RISK

Market watchers said it remained to be seen how long the latest rise in risk appetite would last and much of the yen's losses in early trade had been driven by short-term speculative flows.

"The G20 outcome and U.S. accounting regulation changes went a long way to ease risk aversion and prompt the yen to weaken broadly, but economies will have to improve and banks' balance sheets be cleaned up for optimism to stay," said Takahide Nagasaki, chief FX strategist at Daiwa Securities SMBC.

"Risk appetite could be hit again by developments regarding the fate of U.S. auto makers," Nagasaki said.

The New Zealand dollar climbed 0.6 percent to 57.97 yen after touching a five-month high of 59.01 yen.

Tokyo's Nikkei share average closed up 0.3 percent after rising as much as 1.9 percent but S&P futures fell 0.3 percent indicating a soft start on Wall Street. (Additional reporting by Charlotte Cooper; Editing by Michael Watson)

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