Yen steady as equities stabilise
LONDON - The yen remained steady as the world's equity markets stabilised following the recent swings up and down.
Yesterday's hefty rise in stock markets around the world raised risk appetite and prompted a sizeable sell-off of the Japanese currency, which had benefited from last week's equities rout. Today's relatively flat performance on Europe's bourses has helped the yen consolidate.
"Each bout of yen weakness will provide those investors unable to liquidate their positions in last weeks carnage with the opportunity to salvage some profit, or possibly, the opportunity to minimise the latent losses on their outstanding positions," said Neil Mellor, currency strategist at the Bank of New York.
Last week's slide in stocks prompted a hefty unwinding of the so-called carry trades, where investors borrow in countries like Japan with low interest rates to invest in higher-yielding currencies.
Currency investors, like those in other asset classes, have based their decisions over the last week on the developments in the equity markets, which have suffered one of their worst weeks in years.
Aside from developments in equity markets, investors will be looking for direction from tomorrow's interest rate decisions from the European Central Bank and the Bank of England as well as Friday's closely-watched US jobs report for February and US trade deficit for January.
Because a quarter point increase in the ECB's key refi rate to 3.75 pct is thought to be a done deal, there will be more interest in the ensuing press conference from the central bank's president Jean-Claude Trichet.
Today's news that German factory orders fell 1.0 pct in January posed questions about the economic outlook in the euro zone's largest economy but did little to alter expectations that the ECB will raise rates tomorrow, especially as December's original 0.2 pct decline was revised up to an increase of 0.7 pct.
Meanwhile, the BoE is expected to keep its key repo rate unchanged at the near six-year high of 5.25 pct but traders are conscious that they got stung in January when the central bank surprised most people by lifting rates.
The focus in the US today could well be the monthly ADP employment report for a guide into Friday's payrolls number, and the Fed's beige book, which may well provide an indication as to when the US Federal Reserve will look to soften its monetary policy.
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