FOREX-Yen out in the cold as year-end cheer lifts stocks

Reuters - UK Focus

* Yen falls to fresh five-year lows vs USD & euro

* Record (LSE: REC.L - news) -closing high on Wall Street weighs on thelow-yielding yen

* Higher U.S. Treasury yields also help underpin USD

By Ian Chua

SYDNEY, Dec 27 (Reuters) - The yen wallowed at five-yeartroughs against the dollar and euro on Friday, having fallenprey to a renewed appetite for risk which lifted Wall Street torecord highs and weighed on the low yielding currency.

The dollar fetched 104.81 yen, having risen as far as104.85, while the euro was at 143.47 yen afterpeaking around 143.57 -- highs not seen since October 2008.

The yen's decline came in thin year-end trade and was acontinuation of a well entrenched trend after Japaneseauthorities this year launched a shock-and-awe stimulus strategyto snap the economy out of years of deflation.

Data this morning is likely to provide further evidence theBank of Japan's ultra-loose monetary policy is working withconsumer price inflation expected to hit a new five-year high inNovember.

"USD/JPY continues to move towards my long held year-endtarget of 105.00 and is clearly getting a helping hand by thefact that the U.S. 10-year treasury is at 2.99 percent andtesting the September high of 3 percent," said Chris Weston,chief market strategist at IG (LSE: IGG.L - news) in Melbourne.

"The ever increasing premium the U.S. 10-year treasurycommands against other developed market bonds is clearlyincreasing the USD's appeal."

Yields on Japanese government 10-year bonds are at just 71basis points.

Treasury yields could rise further in 2014 if the FederalReserve continue to scale back its bond-buying program, havinglast week taken the first step towards winding down the massivestimulus plan.

Against the dollar, the euro was little changed at $1.3687, still within a tight range of $1.3654-$1.3717 seen allthis week.

The greenback also advanced against dollar-bloc commoditycurrencies such as the Australian and Canadian dollars, but fellon sterling after strong British mortgage data reinforcedexpectations the Bank of England may raise interest rates soonerthan expected.

Sterling popped up to a 1-1/2 week high of $1.6438 before steadying at $1.6408. The Australian dollar slipped backbelow $0.8900, while the Canadian dollar fell toC$1.0650 per U.S. dollar from C$1.0617.

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