FOREX-Yen stays under a cloud, China data eyed

by on November 21, 2012 11:08 pm BST

Wed Nov 21, 2012 6:08pm EST

* China’s flash PMI in focus, Spanish bond sale also eyed

* Yen wallows near eight-month low vs USD, still vulnerable

* Euro rebounds on renewed Greek loan deal hopes

By Ian Chua

SYDNEY, Nov 22 (Reuters) – The yen languished near
eight-month lows versus the dollar on Thursday as investors gave
it a wide berth on expectations of more policy action in Japan,
while revived hopes of a Greek loan deal saw the euro stage a
dramatic turnaround.

The dollar hit 82.56 yen in early Asian trade,
reaching highs not seen since April. It has surged more than 4
percent in the past 1-1/2 weeks in a move that is expected to
continue into next month’s election in Japan.

“Markets remain firmly focused on the prospects for a more
aggressive post-election BoJ monetary policy stance, implying
that the yen is likely to remain vulnerable in the near term,”
BNP Paribas strategists wrote in a client note.

“But we emphasize again that previous BOJ asset purchases
have not been successful at weakening the yen on a sustained
basis,” they said, adding the recent sharp USD/JPY move should
reverse in the coming months.

Trading in Asia will likely be driven by a preliminary
reading of China’s November manufacturing activity due around
0145 GMT. Markets are looking for further signs that China’s
economic slowdown has stabilised, so any disappointment could
dampen risk appetite.

The euro also rose against the yen, scaling a near
seven-month peak around 105.90 yen, bringing into
view the April high of 108.00. Against the dollar, the single
currency bought $1.2830, having staged a rebound from
Wednesday’s trough around $1.2736.

Investors initially sold the euro on Wednesday after
international lenders failed to reach a deal to release
emergency aid for Greece, but quickly reversed those trades
after German Chancellor Angela Merkel said a deal was still
possible next Monday when they meet again.

“Efforts to avert a Greek default may provide short-term
relief for the euro, but the measures will only help to buy more
time as Greece persistently seeks further external assistance,”
said David Song, currency analyst at DailyFX, who is maintaining
a bearish outlook for the single currency.

The Australian dollar was also better bid at
$1.0369, off Wednesday’s low of $1.0332. The move took the
Aussie back to the middle of this month’s $1.0283/1.0480 range.

Apart from China’s preliminary PMI, a Spanish bond sale due
later in the day will be closely watched.

Madrid has so far refrained from applying for aid that will
trigger the European Central Bank’s bond-buying programme, but
traders say the risk of that happening should be enough to
support the debt auction.