FOREX-Yen rises,euro falls after Irish bank bailout news

Published 09/30/2010, 02:33 AM
Updated 09/30/2010, 02:36 AM
EUR/JPY
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* Euro retreats after Ireland puts price on bank

* Dollar/yen falls on Japan exporters and stops

* Euro/yen extends drop on stop-loss selling

* But intervention risk keeps dollar underpinned

By Charlotte Cooper and Masayuki Kitano

TOKYO, Sept 30 (Reuters) - The euro extended its losses against the dollar and yen on Thursday after Ireland's central bank put the price of bailing out Anglo Irish Bank at 34 billion euros ($46 billion).

The euro initially held steady against the dollar after the announcement but then came under pressure. The euro also dropped against the yen, with its losses gaining steam after triggering stop-loss offers below 113.50 yen, traders said.

The yen rose broadly on the last day of Japan's fiscal half-year. Traders cited factors such as sporadic dollar selling against the yen by Japanese exporters, stop-loss selling, and dollar selling by hedge funds.

The euro's retreat lent support to the dollar, which hit a five-month low on the euro and an eight-month low against a basket of currencies earlier this week, hobbled by speculation of more quantitative easing by the Federal Reserve.

The euro fell 0.4 percent to $1.3586, having pulled back from a five-month high against the dollar of $1.3647 hit on trading platform EBS the previous day.

The euro slid 0.8 percent against the yen to 113.23 yen.

The euro seemed to take in stride news that Moody's had downgraded Spain's local and foreign currency government bond ratings by one notch to Aa1.

The dollar fell 0.4 percent versus the yen to 83.43 yen, edging closer to a 15-year low of 82.87 yen hit on trading platform EBS earlier this month.

Ireland's central bank has put a 34 billion euro price on bailing out stricken Anglo Irish Bank under a worst case scenario and said Allied Irish Banks needs to raise an additional 3 billion euros by the end of the year.

EYES ON JAPANESE AUTHORITIES

The dollar remained supported by nervousness that Japanese authorities might swoop in as they did on Sept. 15, when the Bank of Japan carried out yen-selling intervention for the first time in six years.

"We're in the intervention risk zone because the BOJ were intervening in and around these levels when they first came into the market," said Sue Trinh, a senior currency strategist at RBC in Hong Kong.

Traders said intervention wariness would rise if the dollar fell below 83.00.

"The current levels are a bit in-between, but I think they may step in if the dollar breaks 83.50 and then drops to the upper half of the 82-83 yen range," said a trader for a Japanese bank, adding that intervention might be effective at this stage, since cross/yen pairs were holding up relatively well.

But gauging the intervention trigger point was tricky and some said it might be hard for Japan to intervene at current levels as the latest moves came from dollar weakness rather than yen strength.

Japanese Economics Minister Banri Kaieda was quoted as saying this week that intervention was a temporary measure and the government did not wish to "skew" the market.

The market is also waiting to see if the Bank of Japan takes further easing steps to support the economy and counter the impact of the rising yen at its policy meeting next Monday and Tuesday.

Hedge fund adviser Medley Global Advisors said in a report on Wednesday obtained by Reuters that the BOJ was preparing to ease again. In addition, an unexpected fall in industrial output on Thursday boosted the chances of more easing, with possible options seen as extending a cheap fund-supply. (Editing by Michael Watson)

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