This encouraged investors back into carry trades, in which low-yielding currencies such as the yen and the Swiss franc are sold to finance the purchase of higher-yielding assets elsewhere.
Lena Komileva at Brown Brothers Harriman said attractive valuations after the positioning shake of the last two days had attracted bargain hunters.
Buying on dips re-emerged, reflecting resilient underlying market attitudes towards risk,” she said.
The yen came under pressure as the Japanese government expanded its crisis support measures following last month’s earthquake and the ensuing nuclear crisis. This helped soothe fears over the country’s economy, boosting investor confidence.
Tokyo announced that it would widen the scope of its emergency financing support to include companies that were struggling with broken supply chains, power shortages and the negative foreign sales impact from radiation stigma.
The yen fell 0.5 per cent to Y83.97 against the dollar, lost 0.5 per cent to Y121.65 against the euro and was 0.4 per cent weaker at Y136.88 against the pound.
The yen weakened more aggressively against commodity-linked currencies, dropping 0.9 per cent to Y88.05 against the Australian dollar and falling 1.2 per cent to Y66.30 against the New Zealand dollar.
The Swiss franc retreated form a record high against the dollar, falling 0.2 per cent to SFr0.8988 and was 0.2 per cent weaker at SFr1.3019 against the euro.
Meanwhile, the euro held steady at $1.4487 against the dollar, just shy of the 15-month peak of $1.4518 it hit on Tuesday and edged 0.1 per cent higher to a fresh five-month high of £0.8915 against the pound.
Analysts said expectations of further interest rate rise from the European Central Bank and a pledge from China to continue buying Spanish government debt were supporting the single currency.
In contrast, the dollar and the pound were suffering on expectations that the Federal Reserve and the Bank of England would stick to their ultra loose monetary policy stance in the coming months.
But Valentin Marinov at Citigroup warned that downside risks to the euro remained, given concerns over the Spanish banking sector.
“Investor hawkishness seems to be based on the premise that the ECB can continue hiking interest rates without triggering concerns about the sustainability of the recovery in the eurozone,” he said.
Mr Marinov said disappointing economic data from the eurozone periphery or indications that the Spanish banks were struggling to attract private foreign capital could be one trigger for weakness in the euro.
“In this regard, it will be important to see if the new round of support by the Chinese officials will prove to be more than the symbolic purchases of peripheral bonds announced earlier this year during the Chinese state visit in Europe,” he said. For the latest updates PRESS CTR + D or visit Stock Market news Today
No comments:
Post a Comment