Yen Weakens Against Rival as Risk Averse Mood Recedes On Asian Stocks Recovery

 
   By Hiroyuki Kachi 
 

        The yen weakened against the dollar and other major rival currencies during Asian trading hours Tuesday, with a recovery in Asian stocks prompting nervous investors to loosen their grip on the perceived safety of the Japanese currency.
        At around 0450 GMT, the greenback was at Y123.53, compared with Y123.24 late Monday in New York. The U.S currency managed to stay above the Y123-mark during Asia trade, after falling as low as Y123.07.
        Currency market investors were set to take a risk averse stance especially after Chinese stocks tumbled Monday and commodity prices weakened. With the Nikkei Stock Index's weakness throughout the mid morning and another sharp drop in the Shanghai Composite Index by as much as 5%, investors were looking to pick up the Japanese currency earlier in the session.
        However, stocks gained momentum in China, with the Hang Seng Index last trading up 1.5% and the Shanghai Composite Index falling a more moderate 1.0%.
        Meanwhile, the benchmark Nikkei recouped its earlier losses and was up 0.2% midday.
        Investors tend to sell the Japanese currency, a safe haven asset, when episodes of geopolitical or financial instability fade.
        "They snapped up the yen when Shanghai stocks fell 5% in the morning, but now we are seeing an unwinding of those moves," said Gaitame.Com Research Institute senior researcher Takuya Kanda.
        Many investors, however, are still remaining cautious about the direction of the Chinese stock market or another slide in near term that makes it easier to cause an unwinding of riskier asset positions.
        "There will be no change in the basic market tone where commodity-linked currencies remain vulnerable to selling. Instead, currencies such as the yen and euro that are being held short are easier to be snapped up," said Toshihiko Sakai, senior manager of the forex and financial products trading division at Mitsubishi UFJ Trust and Banking in Tokyo.
        The commodity-linked Australian dollar rose to Y90.40 after falling to as low as Y89.34. With the Australian dollar, nicknamed Aussie, widely considered a classic risk-on currency, and the yen a safe haven bought in risk-off times, the currency pair is prone to extremely dynamic ups and downs in keeping with global economic sentiment.
        The euro was up against the yen, changing hands at Y136.84 midday after falling to as low as Y136.50, while the British pound strengthened to Y192.34 from a low of Y191.46.
        In other currency trade, the U.S. currency was higher against the euro, which fell to $1.1078 midday, compared with $1.1088 overnight.
        The WSJ Dollar Index, a measure of the dollar against a basket of major currencies, was down 0.01% at 88.15.
        Write to Hiroyuki Kachi at Hiroyuki.Kachi@wsj.com
        (END) Dow Jones Newswires

        July 28, 2015 01:24 ET (05:24 GMT)

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