Yen Climbs Against Dollars, Euro as Risk Aversion Deepens

 
   By Hiroyuki Kachi 
 

        The yen climbed against the dollar and the euro in Asia trade Tuesday, as more weakness in oil prices and concerns about the political situation in Greece strengthened caution in markets, fueling safe-haven buying of the Japanese unit.
        Around 0450 GMT, the dollar was at Y119.22 compared with Y119.65 late Monday in New York. The euro was at Y142.43 from Y142.82.
        The Dow Jones Industrial Average suffered its biggest one-day loss since early October after oil prices fell briefly below $50 a barrel on Monday.
        Market participants in Tokyo viewed the U.S. stock market weakness overnight as a sign of a switch back to risk aversion. The Nikkei Stock Average latched on to the falling momentum, dropping by as much as 2.9% at one point.
        The more pessimistic mood drove some investors toward the perceived safety of the Japanese yen, pushing down the greenback to as low as Y119.09. The yen was also bought against the euro, sending the common currency to Y142.28, its lowest since Nov. 10.
        "The dollar itself isn't necessarily weak," said Marito Ueda, director at FX Prime byGMO. While the dollar is being bought, the stock market weakness is fueling more yen buying as political uncertainty in Greece and tumbling oil prices strengthen risk aversion, Mr. Ueda said.
        Still, the dollar's "upward momentum (against the yen) has substantially weakened," Mr. Ueda said, adding that the yen's strength against currencies other than the dollar is also weighing on the dollar-yen pair.
        Uncertainties over the status of Greece including a possible exit from the eurozone are likely to persist until the early election later this month. Taking this factor into account, the dollar is unlikely to test its upside, Mr. Ueda said. He expects the dollar to trade in a 117.50-120.50 range for the rest of the week.
        Greece is set to hold snap elections on Jan. 25 after it failed to elect a new president in a third round of voting late last year. A radical left opposition party is leading in opinion polls ahead of the vote.
        The quick turnaround in sentiment revealed how vulnerable the market still is to oil price weakness, said Osamu Takashima, chief FX strategist at Citigroup Global Markets Japan, in a note. The dollar has downside support at around Y118.70 over the short term on a technical basis, he said.
        In other currency pair trade, the euro was at $1.1947 from $1.1937.
        The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was down 0.24% at 83.64.
        Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com
        (END) Dow Jones Newswires

        January 06, 2015 00:29 ET (05:29 GMT)

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