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FOREX-Yen crosses fall; bank results, Jakarta blasts eyed

Published 07/17/2009, 12:15 AM
Updated 07/17/2009, 12:24 AM
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* Cross/yen falls as exporters sell dollar/yen, euro/yen

* Jakarta blasts send rupiah down

* Market looking ahead to U.S. bank earnings

By Charlotte Cooper

TOKYO, July 17 (Reuters) - The yen gained across the board on Friday, sending higher-yielding currencies lower, as Japanese exporters sold foreign currency and as expected U.S. bank earnings and explosions in hotels in Jakarta kept risk appetite down.

The Indonesian rupiah fell 0.7 percent to 10,200 per dollar after explosions at two Jakarta hotels that killed six people, and traders said state banks stepped in to support it.

Majors such as the euro and Australian dollar, which has been bought as a risk and recovery trade against the low-yielding yen, were already falling in early Asian business after failing to best peaks set on Wednesday, and traders said Japanese exporters were selling.

With U.S. earnings still coming out and bank results due later, analysts and traders said appetite for risk had already started waning earlier in the session and they were divided on whether the Jakarta blasts had affected major currencies.

"Already this morning there was a bit of profit-taking and a slight move away from risk trades," said Mitul Kotecha, head of FX strategy at Calyon in Hong Kong.

"The blasts have added to this direction in terms of risk trades coming off," he said, but added it wasn't a big move.

The euro was down 0.5 percent on the day at 132.20 yen, above the day's low at 131.88 yen set after news of the blasts but below Wednesday's one-week high of 133.40.

The Australian dollar fell 0.3 percent on the day to $0.8014 and 0.6 percent to 75.05 yen after dipping as far as 74.69.

The dollar eased 0.3 percent to 93.67 yen.

"Some exporters who had been aiming to secure a dollar/yen rate of 100 yen and euro/yen of above 135 yen have brought down their sell orders," said a trader for a major Japanese bank.

It was not clear why exporters decided to bring down their offers at this point, he said, but some may be frustrated that dollar/yen and cross/yen hadn't risen further.

The dollar dipped to a five-month low of 91.73 yen in July and then climbed to 94.46 this week, but it failed to make it back into a higher range of 94.50-99.80 held earlier in the year.

It hit a six-week low at 79.131 against the basket of six currencies on Thursday, pressured by bank earnings and an headline improvement in U.S. weekly jobless claims, but rose 0.2 percent on Friday to 79.366.

SHARES AND BANKS

Currency markets have been watching stock markets closely in the past few months as a barometer of investor confidence and with earnings season underway, the next test will be reports later on Friday from Citigroup and Bank of America.

Better-than-expected quarterly earnings from Goldman Sachs and Intel earlier in the week helped boost share markets and lifted hopes about an economic recovery.

Still, JP Morgan reported a surge in consumer credit losses, showing a pullout from recession still has a long way to go, and Citigroup and Bank of America were expected to post relatively weaker performances, discouraging risk trades, one trader said.

"Unlike the Goldman Sachs results no one is talking about them feverishly," noted Sue Trinh, senior currency strategist at RBC Capital Markets in Sydney.

Traders and analysts in Asia were waiting to see how much Japanese investment trusts featuring overseas investment would raise in new launches on Friday. The so-called "toshin" flows are watched with interest as a guide to outflows from the yen.

Investors parked 11.7 billion yen in eight funds with a combined upper subscription limit of 350 billion yen, according to data compiled by Reuters.

Daiwa SB Investments is launching six that will target emerging market bonds, with investors having the option of taking currency risk in the Australian dollar, Brazilian real, New Zealand dollar, South African rand, and Turkish lira.

Those six funds gained 11.4 billion yen against an upper limit of 300 billion yen combined. (Additional reporting by Masayuki Kitano; Editing by Hugh Lawson)

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