FOREX-Yen rises as high-yielders slip; eyes on govt, BOJ

* Yen rises broadly, dollar/yen pressured by US yield drop

* Talk of speculative selling in dollar/yen, cross/yen

* Yen shows subdued reaction to weak Japan Q2 GDP data

* Focus on possible Japan PM-BOJ Gov meeting this week

By Masayuki Kitano

TOKYO, Aug 16 (BestGrowthStock) – The yen rose broadly on Monday as
high-yielding currencies and Asian equities faltered, with talk
of possible demand from Japanese exporters and investor fund
repatriation lending the yen additional support.

Data showing that Japan’s economic growth slowed markedly in
April-June helped drag Tokyo shares lower and supported the
low-yielding yen. [ID:nECONJP] The yen is a funding currency for
carry trades and tends to rise in times of market stress.

A dip in the 10-year U.S. Treasury yield (US10YT=RR: ) to a
fresh 16-month low in Asian trading on Monday helped weigh on the
dollar against the yen.

The yen was also supported by talk of yen-buying by Japanese
exporters and market speculation about possible fund repatriation
by Japanese investors related to coupon payments on U.S.
Treasuries due around this time of August.

But the Japanese currency’s gains were tempered by caution
ahead of a possible meeting between Japanese Prime Minister Naoto
Kan and Bank of Japan Governor Masaaki Shirakawa later this week
to discuss the yen’s strength and possible responses.

“I think the basic direction is toward dollar weakness and
yen strength,” said a trader for a major Japanese bank.

One caveat is that there do not seem to be many players that
are strongly committed to selling the greenback against the yen
right now, judging from how the dollar managed to trim its losses
after the BOJ checked the dollar/yen rate last week.

The dollar dipped 0.4 percent against the yen to 85.84 yen
(JPY=: ), slipping back in the direction of a 15-year low of 84.72
yen struck on trading platform EBS last week.

But traders said there were a decent amount of bids in
dollar/yen on the downside, all the way down to around 84.50 yen,
adding that such bids were likely to support the dollar.

The New Zealand dollar fell 0.8 percent against the yen to
60.35 yen (NZDJPY=R: ) and the Australian dollar slipped 0.7
percent to 76.41 yen (AUDJPY=R: ), while MSCI’s broad measure of
Asian shares outside Japan shed 0.8 percent (.MIAPJ0000PUS: ).

The euro dipped 0.2 percent against the yen to 109.68 yen
(JPY=: ), having earlier dropped to as low as 109.25 yen.

Daily Ichimoku charts are now flashing a sell signal for the
euro against the yen, with the euro having dropped below the
cloud and into bearish territory.

The euro edged up 0.2 percent against the dollar to $1.2781
(EUR=: ), having pared its losses after dipping to $1.2734 on
trading platform EBS earlier on Monday, the euro’s lowest against
the dollar in almost a month.

Last week, the yield spreads of bonds issued by periphery
euro zone countries over the core widened due to concerns over
the cost of supporting the Irish banking sector and a lacklustre
debt auction in Italy.

JAPANESE AUTHORITIES

Some traders said Japan’s weak Q2 GDP data may increase
incentives for Japanese authorities to take measures to curb
export-sapping yen strength.

Government sources have said that the government and the BOJ
are now coordinating to set up a meeting between Kan and
Shirakawa that will likely take place in the second half of this
week, and that news has stirred market speculation that Japanese
authorities may soon unveil some type of response.
[ID:nTOE67B07V]

Market players say the most likely possibility is the
adoption of some form of additional monetary easing or liquidity
provision steps such as expanding the amount or duration of the
BOJ’s fixed-rate fund supply operation, adding that yen-selling
intervention seems unlikely at this stage.

Analysts at RBC Capital Markets see a relatively small risk
of outright intervention from the Japanese authorities.

The yen is not particularly high in real terms, given Japan
has been in deflation for some years, they said.

“Against a broader range of currencies, particularly in real
terms, the yen is far less strong than it looks against the
dollar in isolation,” RBC said in a note to clients.

“Also, the declining share of the U.S. in Japan’s trade and
the rise of China, diminishes the importance of the dollar to the
Japanese authorities, so long as China delivers the yuan
flexibility it promises.”

If Japan were to intervene, market players say the general
feeling was the rest of the Group of Seven rich nations would not
support intervention, leaving Japan to go it alone.
(Additional reporting by Wayne Cole in Sydney; Kaori Kaneko and
Shinji Kitamura in Tokyo; Editing by Joseph Radford)

FOREX-Yen rises as high-yielders slip; eyes on govt, BOJ