FOREX-Yen hovers near 15-year high vs dollar; euro slips

Published 09/09/2010, 02:25 PM
Updated 09/09/2010, 02:28 PM

* Mixed messages from Japanese officials on intervention

* Euro stays under pressure on sovereign debt concerns

* Aussie dollar hits 4-month high on solid jobs data (Adds quote, updates prices, changes byline)

By Wanfeng Zhou

NEW YORK, Sept 9 (Reuters) - The yen hovered near a 15-year high against the dollar on Thursday as conflicting messages from policymakers led investors to bet Japanese authorities were not ready to intervene to weaken their currency.

The euro fell against the dollar and yen as concerns about the health of the European banking sector and sovereign debt issues persisted.

Japanese Finance Minister Yoshihiko Noda said his ministry was conducting simulations on forex intervention. But his comments were somewhat undermined after Bank of Japan Governor Masaaki Shirakawa said he did not discuss currencies and monetary policy at a government meeting.

Analysts expect the yen to stay firm in the coming months as uncertainties about the outlook for the United States and global economies prompt investors to seek safety. Analysts do not expect Japan to intervene until the dollar falls near 80 yen.

"We saw the continued differences in opinion between the Ministry of Finance and the Bank of Japan," said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.

Comments by the BOJ governor were "seen by the market as a sign they're not going to intervene in the near future," Strauss said. "The momentum is still favoring a stronger yen."

In afternoon trading in New York, the dollar was down slightly at 83.85 yen. It earlier hit a session low of 83.49, according to electronic trading platform EBS, within sight of the 15-year low of 83.34 yen hit on EBS on Wednesday.

Options traders said there was good demand for yen calls in the 1-month to 2-month bracket, but yen puts were more popular in shorter dates, suggesting investors are hedging their bets about possible intervention.

Traders expect the yen to weaken if Japanese authorities intervene, though longer term investors point to the failure of recent Swiss national bank intervention to stifle the franc's strength.

"Markets try always to move to what we have called 'the obscene number' before turning around, and given that the all-time high for the yen is just below 80, it seems reasonable to assume that we shall at least visit that level before turning in the other direction," said analyst Dennis Gartman.

EURO ZONE WORRIES

The euro was last down 0.2 percent at $1.2696. Against the yen, the euro fell 0.2 percent to 106.50, after hitting a session low of 105.98 yen, moving closer to a nine-year low of 105.41 yen hit in late August.

The euro's weakness came despite a slight increase in risk appetite, which got a boost after better-than-expected U.S. data on the U.S. jobs market and trade activity raised hopes the economic recovery would accelerate.

"The dollar is holding its own, especially against the euro, more as a result of the continued concerns in Europe regarding the sovereign debt issues," RBC's Strauss said.

Traders said the euro came under pressure after failing to convincingly break resistance at $1.2760.

"Confidence is evaporating in the euro zone banking system, particularly for Portugal, Ireland and Greece, and supporting the system will require government debt to rise to unsustainable levels. That is what the market is concerned about," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ in London.

The Australian dollar extended gains as a barrier was taken out at $0.9250, hitting a four-month high on strong jobs data and rising speculation of a rate rise. The Aussie dollar was last up 0.5 percent at 0.9235.

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