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FOREX-Yen jumps to 4-wk high vs euro on G7 remarks
Thu Sep 7, 2006 8:27am ET
By Sujata Rao
LONDON, Sept 7 (Reuters) - The yen jumped to a four-week high against the euro on Thursday after Germany's deputy finance minister said yen weakness and the yuan currency would be discussed at a Group of Seven meeting later this month.
The currency dipped only briefly on comments from Japan's top diplomat Hiroshi Watanabe who declined to say which currencies would be discussed and said he expected no annex statement on global imbalances at the meeting. Instead, markets re-focused on comments from Germany's Thomas Mirow.
"You know that the yen has clearly weakened against the dollar and in particular against the euro and in that sense this will certainly be discussed," Mirow told reporters in Berlin ahead of the mid-September meeting.
Analysts said the comments reflected euro zone governments' unease about the euro's strength against the Japanese currency which recently hit a record lows versus the euro beyond 150.70.
"Positioning is the best explanation for the size of the moves on Mirow -- the market has been short of yen for quite a while," said Tim Fox, currency strategist at Dresdner Kleinwort.
"The comments from Watanabe that there would be no annex on global imbalances had surprisingly little impact, which suggests that positioning overrode them," Fox added.
By 1145 GMT the yen had gained over three quarters of a percent to 148.05 per euro, paring gains from a high of 147.88 <EURJPY>.
Against the dollar, the yen was about half a percent higher at 116.18 <JPY>, just off the day's high of 116. It had been languishing near a three-day low of 117.05 before Mirow's comments.
Caution over the near-term outlook for Japanese rates after a slew of weak economic data had prompted analysts to scale back short-term forecasts for the yen.
Japan's central bank is seen leaving rates steady at 0.25 percent at its two-day policy meeting that started on Thursday.
On the other hand, the euro has been supported by forecasts of further policy tightening, a view that was reinforced by European Central Bank Governing Council member Yves Mersch on Thursday.
Mersch said the ECB will show the greatest vigilance towards inflation beyond the immediate future.
Economic surveys show growth in the euro zone and the ECB will continue raising interest rates to check inflationary pressure, ECB Governing Council member Erkki Liikanen said in an interivew with Reuters.
Some analysts saw the yen moves as a bit of an overreaction.
"We are seeing some position-liquidation which could continue for a period...but what can the G7 possibly do?" said Derek Halpenny at BOTM-UFJ.
"If they are not comfortable with levels on euro/yen there is nothing they can do basically
U.S. RATE TALK
The dollar had a boost on Wednesday from data that showed a surprisingly big jump in U.S. labour costs and suggested that the two-year long U.S. rate tightening cycle may have further to go.
That data helped the dollar strengthen against the euro, trading half a percent higher at $1.2727 <EUR> and pushing sterling lower as well.
Sterling hit a one-month low against the dollar as the greenback strengthened against the euro.
The pound was about half a percent down against the dollar at $1.8736 <GBP> after sliding more than 1 percent in the past two days.
As expected, the Bank of England held rates steady at 4.75 percent after a surprise increase in August.
Uncertainty over the timing of Prime Minister Tony Blair's departure from office weighed on the British currency.
Blair is due to give a statement between 1300 and 1400 GMT, but a spokesman for Blair told reporters the premier was unlikely to confirm reports that he would step down within one year.
Elsewhere, U.S. Treasury Secretary Henry Paulson will be attending an Asia-Pacific Economic Cooperation (APEC) forum meeting in Vietnam this week, along with his counterparts from China and Japan.
A news conference from BOJ Governor Toshihiko Fukui after the bank's policy meeting on Friday and a speech by San Francisco Fed President Janet Yellen later on Thursday will also be scrutinised for clues on future monetary policy.
FOREX-Yen jumps to 4-wk high vs euro on G7 remarks
Thu Sep 7, 2006 8:27am ET
By Sujata Rao
LONDON, Sept 7 (Reuters) - The yen jumped to a four-week high against the euro on Thursday after Germany's deputy finance minister said yen weakness and the yuan currency would be discussed at a Group of Seven meeting later this month.
The currency dipped only briefly on comments from Japan's top diplomat Hiroshi Watanabe who declined to say which currencies would be discussed and said he expected no annex statement on global imbalances at the meeting. Instead, markets re-focused on comments from Germany's Thomas Mirow.
"You know that the yen has clearly weakened against the dollar and in particular against the euro and in that sense this will certainly be discussed," Mirow told reporters in Berlin ahead of the mid-September meeting.
Analysts said the comments reflected euro zone governments' unease about the euro's strength against the Japanese currency which recently hit a record lows versus the euro beyond 150.70.
"Positioning is the best explanation for the size of the moves on Mirow -- the market has been short of yen for quite a while," said Tim Fox, currency strategist at Dresdner Kleinwort.
"The comments from Watanabe that there would be no annex on global imbalances had surprisingly little impact, which suggests that positioning overrode them," Fox added.
By 1145 GMT the yen had gained over three quarters of a percent to 148.05 per euro, paring gains from a high of 147.88 <EURJPY>.
Against the dollar, the yen was about half a percent higher at 116.18 <JPY>, just off the day's high of 116. It had been languishing near a three-day low of 117.05 before Mirow's comments.
Caution over the near-term outlook for Japanese rates after a slew of weak economic data had prompted analysts to scale back short-term forecasts for the yen.
Japan's central bank is seen leaving rates steady at 0.25 percent at its two-day policy meeting that started on Thursday.
On the other hand, the euro has been supported by forecasts of further policy tightening, a view that was reinforced by European Central Bank Governing Council member Yves Mersch on Thursday.
Mersch said the ECB will show the greatest vigilance towards inflation beyond the immediate future.
Economic surveys show growth in the euro zone and the ECB will continue raising interest rates to check inflationary pressure, ECB Governing Council member Erkki Liikanen said in an interivew with Reuters.
Some analysts saw the yen moves as a bit of an overreaction.
"We are seeing some position-liquidation which could continue for a period...but what can the G7 possibly do?" said Derek Halpenny at BOTM-UFJ.
"If they are not comfortable with levels on euro/yen there is nothing they can do basically
U.S. RATE TALK
The dollar had a boost on Wednesday from data that showed a surprisingly big jump in U.S. labour costs and suggested that the two-year long U.S. rate tightening cycle may have further to go.
That data helped the dollar strengthen against the euro, trading half a percent higher at $1.2727 <EUR> and pushing sterling lower as well.
Sterling hit a one-month low against the dollar as the greenback strengthened against the euro.
The pound was about half a percent down against the dollar at $1.8736 <GBP> after sliding more than 1 percent in the past two days.
As expected, the Bank of England held rates steady at 4.75 percent after a surprise increase in August.
Uncertainty over the timing of Prime Minister Tony Blair's departure from office weighed on the British currency.
Blair is due to give a statement between 1300 and 1400 GMT, but a spokesman for Blair told reporters the premier was unlikely to confirm reports that he would step down within one year.
Elsewhere, U.S. Treasury Secretary Henry Paulson will be attending an Asia-Pacific Economic Cooperation (APEC) forum meeting in Vietnam this week, along with his counterparts from China and Japan.
A news conference from BOJ Governor Toshihiko Fukui after the bank's policy meeting on Friday and a speech by San Francisco Fed President Janet Yellen later on Thursday will also be scrutinised for clues on future monetary policy.
