FOREX-Yen slips as market regains stability, Aussie rises

Mon, Oct 20 2008, 06:16 GMT
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TOKYO, Oct 20 (Reuters) - The yen fell against the euro and the Australian dollar on Monday as news that a crisis summit was planned for next month helped the market regain some stability and prompted investors to pick up recently battered currencies.

South Korea joined the list of countries announcing steps to stabilise markets, while the Dutch government agreed to pump some 10 billion euros ($13.4 billion) into ING, the country's largest listed bank.

"A slew of recent policy actions worldwide has provided some relief to the banking sectors in the major economies," said Kengo Suzuki, a currency strategist at Shinko Securities.

Hopes that the unprecedented central bank tactics to combat the global credit crisis may finally be unlocking funds for cash-strapped banks also eased investor risk aversion and cut safety demand for the yen, traders said.

"A freeze in interbank markets was a big factor behind the global financial woes. So investor risk appetite has warmed up a little as conditions in money markets are improving," said Hiroshi Yoshida, a currency trader at Shinkin Central Bank.

The euro rose 0.7 percent against the yen to 137.25 yen in choppy trade, climbing further from a three-year low of 132.15 yen hit about two weeks ago.

A Wall Street Journal report from late Friday that JPMorgan Chase led three U.S. banks in lending billions of short-term dollar funding to European counterparties stirred hopes for a sharp drop in LIBOR, or London interbank offered rates, later in the day.

Separately, the German government is setting strict conditions for banks planning to tap into its 500 billion euro ($672 billion) rescue package, including limits on manager salaries, according to a draft of the law seen by Reuters.

The euro rose 0.4 percent to $1.3469 partly due to dollar selling against the Australian dollar, traders said.

The Aussie dollar rose against the dollar and the yen after higher producer-price figures for the third quarter added to speculation that the Australian central bank may not cut interest rates as aggressively as previously thought.

Weekend reports said the Reserve Bank of Australia (RBA) may hold interest rates steady at a Nov. 4 meeting.

The Aussie jumped 1.5 percent to $0.6991 and was up 1.8 percent against the yen at 71.27 yen.

Yet safety demand for the low-yielding yen and the dollar, the world's most liquid currency, could return quickly as global financial markets remain fragile and investors have stayed away from risky investments, analysts said.

"The fall in the yen against the euro and the Aussie does not look like anything more than a short-term technical adjustment," said a trader at a Japanese trust bank.

Some investors were concerned about the impact of deteriorating financial conditions in emerging markets highlighted by Iceland, Ukraine and Pakistan, which had sought aid to prop up their economies

President George W. Bush said on Saturday he would host a crisis summit soon after a Nov. 4 U.S. presidential election.

The dollar rose 0.3 at 101.95 yen after more bleak data on Friday intensified investors' concerns that the credit crisis has knocked the U.S. economy into recession even though Japan's Nikkei share average was up nearly 3 percent. ($1=.7439 Euro) (Additional reporting by Rika Otsuka; Editing by Michael Watson)

Keywords: MARKETS FOREX All data taken from Reuters calculated from the levels at 2130 GMT in the previous New York session. Last US Close Pct YTD Pct 2007 Oct. 17 Change Change Close ------------------------------------------------------------- Euro/dlr 1.3462 1.3407 +0.41 -7.72 1.4589 Dlr/yen 101.94 101.65 +0.29 -8.43 111.33 Euro/yen 137.26 136.28 +0.72 -15.48 162.39 Dlr/swiss 1.1345 1.1369 -0.21 +0.09 1.1335 Stg/dlr 1.7372 1.7285 +0.50 -12.47 1.9847 Dlr/cad 1.1812 1.1821 -0.08 +18.55 0.9964 Aus/dlr 0.6993 0.6887 +1.54 -20.14 0.8757 Nzd/dlr 0.6141 0.6117 +0.39 -19.89 0.7666 Aus/yen 71.290 70.010 +1.83 -26.85 97.460 Nzd/yen 62.600 62.180 +0.68 -26.61 85.300 Stg/yen 177.12 175.70 +0.81 -19.93 221.22 Aus/Nzd 1.1371 1.1240 +1.17 -0.39 1.1416 All spots Asia spots Europe spots Volatilities Japan capital flows data Latest uridashi bond issues World central bank news Economic Forecasts Official rates Forex Diary Top events Diaries Diaries Index Press Digests Polls on G7 economies European markets Keywords: MARKETS FOREX=2

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