Yen Higher As Risk-Aversion Deepens

 
   By Hiroyuki Kachi 
 

        The yen strengthened against its rivals in Asian trade Tuesday, as the prevailing mood of risk-aversion deepened on tumbling oil prices and stock market weakness.
        As of 0450 GMT, the dollar was at Y117.42 from Y117.73 late Monday in New York. The euro also fell to Y146.28 from Y146.34.
        While sharply lower oil prices are good news for net energy importers such as Japan, some economies that are heavily reliant on oil revenues, among them Russia, are less than happy about the declines.
        Following the steepest selloff in the ruble against the dollar in a single day since 1999, Russia's central bank hauled its key interest rate Tuesday up to 17% from 10.5%.
        Signs of the gloom among investors were evident in Tokyo, where the Nikkei Stock Average was down 1.8% in the mid-afternoon session Tuesday.
        The slide may have been exaggerated since many investors were keeping to the sidelines with many of them expecting U.S. monetary authorities to signal the timing for an eventual increase in interest rates at its upcoming Federal Open Market Committee meeting scheduled for Dec. 16-17.
        But with the benchmark Nikkei extending its losses in early afternoon trading, investors bought into the perceived safety of the yen at times of financial instability.
        Option-related stop-loss selling orders gave the pair an extra push to as low as Y117.30, but the downside looks well supported due to bids from Japanese importers, said a Japanese bank dealer. "This helps prevent (the pair) going straight down further, even after a breach," of an option-related barrier, the dealer said.
        "We are in a risk-off mode driven mainly by adjustments," said Junichi Ishikawa, market analyst at IG Securities, downplaying for now the possible downward movement of the greenback. "That means the dollar is still relatively firm."
        But Mr. Ishikawa said he is among market participants that see potential for the upcoming FOMC meeting to strengthen risk-aversion rather than risk-taking.
        He says any hawkish signals coming from the U.S. policy setting meeting could help increase short-term U.S. Treasury yields at a time when the global stock market is slumping, fueling further falls in share prices.
        "That could be a factor that helps prolong the ongoing risk-off mood and the adjustment phase in the market," said Mr. Ishikawa.
        Mizuho Bank chief market analyst Daisuke Karakama said in a report that for many resource importers like Japan, oil price weakness is having a beneficial effect as they benefit from what is like a tax cut on crude. But the spotlight is now on the negative aspects of cheaper crude such as concerns about the shale gas industry in the U.S. and worries about the financial standing of energy-exporting nations such as Russia.
        "The prevailing mood at the moment makes it difficult to consider risk-taking," Mr. Karakama said.
        In other currency trading, the euro was at $1.2456 from $1.2435.
        The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was down 0.40% at 81.77.
        Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com
        (END) Dow Jones Newswires

        December 16, 2014 00:51 ET (05:51 GMT)

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