By Wanfeng Zhou
NEW YORK, March 16 (Reuters) - The yen matched its record high against the dollar on Wednesday as concerns escalated over a nuclear crisis in Japan, with investors nervously watching if Japanese authorities will step in to stem the currency's rise.
The dollar fell more than 1 percent to 79.75 yen on trading platform EBS, matching its all-time low set on April 19, 1995. Some analysts say expectations that Japan will intervene to weaken the currency -- if it gets stronger -- may provide a good opportunity to buy the greenback.
Officials scrambled to contain the nuclear crisis in Japan with a variety of patchwork fixes. The head of the world's nuclear watchdog said while it was not accurate to say things were 'out of control' in Japan, the situation was 'very serious.' For details, see
The yen has seen steady buying since last week's earthquake, as Japanese and international investors closed long positions in higher-yielding, riskier assets such as the Australian dollar, funded by cheap borrowing in the Japanese currency.
'At the moment, the psychological effect on investors is significant. This is part of the short-term phenomenon that's driving the yen higher,' said Ugo Lancioni, currency strategist and portfolio manager at Neuberger Berman in London.
'The market reacts very much to risk aversion by reducing positions. Given that Japanese investors are somewhat exposed to international assets that have higher yields than the yen, it's not unusual to see repatriation flows as a result of an unwinding of those positions,' he said.
The firm manages about $190 billion in assets. Lancioni helps oversee about $80 billion in investment-grade fixed-income assets.
The dollar last traded down 1.1 percent at 79.82 yen. It has been down about 3.7 percent in the last four sessions, the biggest drop since May 2010.
INTERVENTION LOOMS
Market participants expect Japan to try to lean against any further appreciation by selling yen in the market and driving the dollar higher. A stronger yen would make Japanese exports less competitive and put further pressure on the economy.
Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, said a lull in volume between the New York close and early Asian trading might be a possible opportunity for intervention.
'They might get a little bit more of a bang for the buck during that period,' he said.
Japan last intervened in the foreign-exchange market on Sept. 15 and spent about $22 billion to weaken the yen, which was trading near 83 per dollar.
Kathy Lien, director of research at GFT in New York, said there's a 'very strong possibility that the Bank of Japan could come into the markets and buy dollars between 75 and 80.' But she added that for intervention to be truly successful, Japan needs to gain the support of other major economies.
France said on Wednesday that G7 finance ministers and central bankers will hold a conference call to discuss the economic impact of Japan's crisis and possible steps to calm volatile financial markets. See
'Japan will take this opportunity to make a plea for coordinated intervention and there may be less opposition, given the severity of the situation in Japan and impact that it has had on the financial markets around the world,' Lien said.
YEN NEGATIVE
Despite the yen's rally in recent days, analysts said the earthquake will likely force the Bank of Japan to keep its monetary policy stimulative for longer, even as other central banks have signaled readiness to raise interest rates.
'In the long run, our view is that the yen could depreciate especially if global yields continue to move higher,' Lancioni said.
Ken Dickson, investment director of currencies at Standard Life Investments, with 156.9 billion pounds ($252.5 billion) in assets, said dollar/yen levels look attractive.
'Excellent levels to buy the dollar against the yen are imminent,' Dickson said. 'We are not convinced repatriation will strengthen the yen further.'
The euro fell 1.8 percent to 110.87 yen and dropped 0.8 percent against the dollar to $1.3887.
The ECB is expected to lift rates as soon as next month, though governing council member Christian Noyer cast some doubt on that on Wednesday, when he said the bank would weigh the impact of Japan's crisis on policy decisions.
The Swiss franc, a traditional safe haven, hit a record high against the dollar. The U.S. dollar fell as low as 0.9072 franc.
(Additional reporting by Steven C. Johnson; Editing by Jan Paschal) Keywords: MARKETS FOREX (wanfeng.zhou@thomsonreuters.com; +1 646 223 6304; Reuters Messaging: wanfeng.zhou.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, March 16 (Reuters) - The yen matched its record high against the dollar on Wednesday as concerns escalated over a nuclear crisis in Japan, with investors nervously watching if Japanese authorities will step in to stem the currency's rise.
The dollar fell more than 1 percent to 79.75 yen on trading platform EBS, matching its all-time low set on April 19, 1995. Some analysts say expectations that Japan will intervene to weaken the currency -- if it gets stronger -- may provide a good opportunity to buy the greenback.
Officials scrambled to contain the nuclear crisis in Japan with a variety of patchwork fixes. The head of the world's nuclear watchdog said while it was not accurate to say things were 'out of control' in Japan, the situation was 'very serious.' For details, see
The yen has seen steady buying since last week's earthquake, as Japanese and international investors closed long positions in higher-yielding, riskier assets such as the Australian dollar, funded by cheap borrowing in the Japanese currency.
'At the moment, the psychological effect on investors is significant. This is part of the short-term phenomenon that's driving the yen higher,' said Ugo Lancioni, currency strategist and portfolio manager at Neuberger Berman in London.
'The market reacts very much to risk aversion by reducing positions. Given that Japanese investors are somewhat exposed to international assets that have higher yields than the yen, it's not unusual to see repatriation flows as a result of an unwinding of those positions,' he said.
The firm manages about $190 billion in assets. Lancioni helps oversee about $80 billion in investment-grade fixed-income assets.
The dollar last traded down 1.1 percent at 79.82 yen. It has been down about 3.7 percent in the last four sessions, the biggest drop since May 2010.
INTERVENTION LOOMS
Market participants expect Japan to try to lean against any further appreciation by selling yen in the market and driving the dollar higher. A stronger yen would make Japanese exports less competitive and put further pressure on the economy.
Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington, said a lull in volume between the New York close and early Asian trading might be a possible opportunity for intervention.
'They might get a little bit more of a bang for the buck during that period,' he said.
Japan last intervened in the foreign-exchange market on Sept. 15 and spent about $22 billion to weaken the yen, which was trading near 83 per dollar.
Kathy Lien, director of research at GFT in New York, said there's a 'very strong possibility that the Bank of Japan could come into the markets and buy dollars between 75 and 80.' But she added that for intervention to be truly successful, Japan needs to gain the support of other major economies.
France said on Wednesday that G7 finance ministers and central bankers will hold a conference call to discuss the economic impact of Japan's crisis and possible steps to calm volatile financial markets. See
'Japan will take this opportunity to make a plea for coordinated intervention and there may be less opposition, given the severity of the situation in Japan and impact that it has had on the financial markets around the world,' Lien said.
YEN NEGATIVE
Despite the yen's rally in recent days, analysts said the earthquake will likely force the Bank of Japan to keep its monetary policy stimulative for longer, even as other central banks have signaled readiness to raise interest rates.
'In the long run, our view is that the yen could depreciate especially if global yields continue to move higher,' Lancioni said.
Ken Dickson, investment director of currencies at Standard Life Investments, with 156.9 billion pounds ($252.5 billion) in assets, said dollar/yen levels look attractive.
'Excellent levels to buy the dollar against the yen are imminent,' Dickson said. 'We are not convinced repatriation will strengthen the yen further.'
The euro fell 1.8 percent to 110.87 yen and dropped 0.8 percent against the dollar to $1.3887.
The ECB is expected to lift rates as soon as next month, though governing council member Christian Noyer cast some doubt on that on Wednesday, when he said the bank would weigh the impact of Japan's crisis on policy decisions.
The Swiss franc, a traditional safe haven, hit a record high against the dollar. The U.S. dollar fell as low as 0.9072 franc.
(Additional reporting by Steven C. Johnson; Editing by Jan Paschal) Keywords: MARKETS FOREX (wanfeng.zhou@thomsonreuters.com; +1 646 223 6304; Reuters Messaging: wanfeng.zhou.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2011. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.