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FOREX-Yen retreats; Dollar slides vs commodity currencies

Published 08/24/2009, 11:31 AM
Updated 08/24/2009, 11:33 AM
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* Yen weakens across the board, global equities rise

* Dollar retreats versus commodity currencies

* Sterling under pressure vs dollar, euro

* June euro zone new orders beat forecasts (Updates prices, adds comment)

By Gertrude Chavez-Dreyfuss

NEW YORK, Aug 24 (Reuters) - The yen fell on Monday while the U.S. dollar slid against commodity currencies such as the Australian and New Zealand dollars as investors became more comfortable with riskier trades given gains in global equities and solid U.S. and euro zone economic data.

The market refocused on risk-taking in the wake of stronger-than-expected U.S. existing home sales data on Friday, upbeat comments from Federal Reserve Chairman Ben Bernanke and Monday's data showing firmer industrial orders in the euro zone.

The low-yielding yen tends to fall against high-yielding currencies when equities rise or data strengthens hopes for a recovery in the global economy, which bodes well for commodity producers.

But the dollar, which also usually declines when risk sentiment picks up, held its ground against major currencies such as the euro and sterling.

"Across the board, risk trades are a little bit more attractive and we're seeing a weaker yen and a stronger Aussie and Kiwi," said John McCarthy, director of foreign exchange at ING Capital Markets in New York.

"But I wouldn't read too much into it. Volumes are thin and we still have a few weeks of summer trading. The dollar, overall, is still locked in a range."

In midday New York trading, the dollar was up 0.4 percent against the yen at 94.74 yen , after briefly hitting a one-week high of 95.06 yen, according to Reuters data.

The euro was up 0.3 percent at 135.62 yen but was flat on the day versus the dollar at $1.4317 .

The euro trimmed losses against the greenback after euro zone industrial orders came in much higher than expected. Euro zone industrial orders rose 3.1 percent in June from the previous month, beating forecasts of a 1.5 percent gain. [ID:nBRQ007483].

EURO ZONE DATA, STERLING FALL

Traders are keen to see how the euro zone economy fares, especially after higher-than-forecast purchasing managers' index readings last week. Germany's Ifo survey of business sentiment will be key this week, analysts said.

Despite increased risk appetite, sterling failed to gain ground versus the dollar, falling 0.5 percent on the day at $1.6422 . Against the euro, sterling fell to an 11-week low, with the euro hitting a high around 87.27 pence , according to Reuters data.

Traders said investors took out a key options barrier at 87 pence in euro/sterling, precipitating further gains in the pair. Analysts said sterling remained pressured by expectations UK interest rates will stay low for some time as the Bank of England pushes to extend its quantitative easing policy.

U.S. data will also be in focus this week. The Conference Board will release its August consumer confidence index on Tuesday and Reuters/University of Michigan will report their late August snapshot on consumer sentiment on Friday.

U.S. new home sales, durable goods orders and revised second-quarter gross domestic product data are all due this week.

The Federal Reserve's Jackson Hole, Wyoming, gathering over the weekend offered a variety of opinions about the global economy, with Fed Chairman Ben Bernanke acting as the cheerleader for growth. See ANALYSIS [ID:nN23121486].

"Official comments from the central bankers' symposium ... may have not added any new information, but they did to some extent validate the market's view that the global economy is already on the recovery path," said Vassili Serebriakov, currency strategist at Wells Fargo in New York.

Signs of some stabilization in Chinese equities also supported higher-yielding currencies. The Shanghai Composite Index ended more than 1 percent higher <.SSEC>.

In other currencies, the Australian dollar rose 0.8 percent to 79.71 yen while it gained 0.7 percent versus the U.S. dollar to US$0.8404 . The New Zealand dollar was also higher, up 0.5 percent at US$0.6863 . (Editing by Dan Grebler)

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