Thursday, January 14, 2016

Renewed volatility in Asia pushes investors into the safety of the yen

Uncertainty plagues the currency markets: analyst

The yen was slightly higher against the dollar and other currencies in Asia Thursday, as investors bought the perceived safety of the Japanese currency following renewed volatility in Asian stocks.
Tracking an overnight selloff after further oil price weakness, the greenback USDJPY, +0.10%  fell to as low as ¥117.29 during Asia trade before bouncing back to ¥117.77 with Y¥117.68 late Wednesday in New York.
Brent crude LCOG6, +1.68%  , the global benchmark, dropped below $30 barrel intraday for the first time since 2004 amid a global supply glut and fears of a deepening slowdown in China.
Indonesia’s risk-sensitive rupiah was weaker against the U.S. dollar after explosions and gunfire hit the capital Jakarta. The dollar rose to as high as 13,990 Indonesia rupiah USDIDR, +0.58%  from IDR13,932 before the explosions.
A risk-averse mood persisted in Tokyo after the Dow Jones Industrial Average DJIA, -2.21%  fell 2.2% to its lowest level since late September.
The Nikkei Stock Average NIK, -2.68%  was down 2.7% at 17,240.95, after briefly falling below the 17,000 level for the first time since Sept. 29 2015. Meanwhile, the benchmark Shanghai Composite Index SHCOMP, +1.97%  was up 1%.
But the dollar showed enough resilience to stay around ¥117.50 with dip buying kicking in to support the greenback. After confirming the dollar’s downside around ¥116.70 earlier this week, there seems to be dollar buying orders from a broader range of investors including Japanese importers especially during Tokyo hours.
“I can feel uncertainty,” given U.S. stocks’ steep decline despite the relatively healthy state of the U.S. economy, said Takuya Kanda, senior researcher at Gaitame.Com Research Institute.
“It looks the market has overreacted” to the oil price decline, but that also suggests the market remains uncertain about future course of the global economy, he said, adding that markets were not fully considering the positive aspects of a low oil price environment.
The Japanese currency was also stronger against the euro EURJPY, +0.23% which briefly hit ¥127.75 before regaining to ¥128.05 midday compared with ¥128.05 late Wednesday. The U.K. pound GBPJPY, +0.11%  touched as low as ¥168.84, its cheapest level since October 2014, before recovering to ¥169.74 midday.
The Australian dollar AUDJPY, +0.09%  fell to as low as ¥81.22 midday from ¥81.98.
In other currency-pair trading, the euro EURUSD, +0.1103%  gained against the dollar with the common currency changing hands at $1.0873 from $1.0833.
The WSJ Dollar Index BUXX, +0.00% a measure of the dollar against a basket of major currencies, was up 0.07% at 91.18.

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