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FOREX-Yen gains as exporters buy, US bank plan in focus

Published 02/09/2009, 02:00 AM
Updated 02/09/2009, 02:08 AM

* Yen rebounds from 1-mth low vs dollar as exporters buy

* Asian stocks fall, undermining risk appetite

* Market looking to U.S. financial stability plan on Tues

By Charlotte Cooper

TOKYO, Feb 9 (Reuters) - The yen rose against the dollar on Monday, rebounding from a one-month low as Japanese exporters took the opportunity to buy it at cheaper levels and as investors grew nervous in the wait for a U.S. bank bailout plan.

The Japanese currency had tumbled against the dollar and euro on Friday as rising U.S. job losses spurred expectations for quick progress on a U.S. economic stimulus package and bank bailout plan, improving investors' appetite for risk.

But news the Obama administration had pushed back the bank announcement to Tuesday from Monday undermined market confidence, with Japan's Nikkei stock average falling and S&P futures pointing to a weaker start on Wall Street. "Exporters seem to be selling dollar/yen so that's providing yen support," said Sharada Selvanathan, currency strategist at BNP Paribas in Hong Kong.

"But also Asian equity markets have not been able to hold on to the gains we saw this morning, that's taking off some of the steam with regards to the high-yielding currencies."

The dollar fell 0.8 percent to 91.11 yen, reversing an early climb to a one-month peak of 92.42 on trading platform EBS.

The euro shed 1.2 percent to 117.39 yen while sterling fell more than 1 percent against the Japanese currency and the Australian dollar shed 2 percent.

"Some hedge funds also took profits on Friday's long euro/yen strategy," said a senior dealer at a European bank.

The euro eased 0.3 percent to $1.2899 after climbing more than 1 percent on Friday.

BANK PLAN

The U.S. financial stability plan is due to be outlined by Treasury Secretary Timothy Geithner at 1600 GMT on Tuesday.

Analysts said currencies would likely take their cue from how stock markets react to the plan, with steps seen as effective in shoring up the U.S. economy likely to boost investor confidence at least in the short term.

"So even though we are seeing the yen higher today, that could turn around if the market gives a vote of confidence towards the plan," Selvanathan said.

Nonetheless analysts expected the week to be choppy.

"Things aren't necessarily improving but at least governments are stepping in to help. But investors are still very nervous and have been burned before. Putting on risky trades will take some time," she said.

Some said the dollar could push towards 94.00 yen after it broke above a triangle pattern on technical charts late last week, although underlying risk aversion could make gains tricky.

The market was also trying to gauge whether Japanese investors would repatriate funds from overseas assets ahead of financial year book-closing at the end of March.

"Some people say that in February, Japanese will basically only conduct fund repatriation," said Minoru Shioiri, chief manager of foreign exchange trading for Mitsubishi UFJ Securities.

Since February is a month when there is a relatively large amount of coupon payments on U.S. Treasuries, there is focus on the potential for dollar selling by Japanese players, he said.

Some $25 billion in coupon payments in Treasuries are due on Feb. 15, according to U.S. Treasury Department data. In addition, $36 billion in maturing coupon securities are due that day.

The market hardly reacted to data showing Japan's current account surplus fell 92.1 percent in December from a year earlier, and that Japan's core private-sector machinery orders fell by a smaller-than-expected 1.7 percent in December.

Corporate bankruptcies soared in January, while a freeze in capital markets forced Japanese companies to borrow from banks at a record pace.

(Additional reporting by Masayuki Kitano; Editing by Brent Kininmont)

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