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Yen eases, Aussie up but risk uptake lacks momentum

TOKYO - The yen slipped against other major currencies on Tuesday as a sell-off in growth-linked currencies waned and the Aussie firmed after upbeat central bank minutes reinforced expectations for more interest rate rises.

Investor appetite for riskier assets was supported by some positive U.S. earnings reports, which helped Wall Street shares rise and countered fears about a broader regulatory impact from the fraud case brought against Goldman Sachs.

Still, the yen’s slide slowed as Chinese shares remained vulnerable after suffering their biggest percentage loss since last August, keeping investors away from risky currencies with high volatility.

“There seems to be a pause in yen buy-backs for now on Wall Street and good earnings results, but I am not sure whether the yen’s rise on risk-off moves is over yet,” said a senior forex manager at a UK bank said.

The dollar rose 0.3 percent from late New York trade to 92.64 yen, having gained nearly 0.3 percent the previous day.

Traders said the greenback was helped by demand from Japanese importers, but those who have dollar/yen shorts are still holding on to them on the view that upside risk for the yen remains high.

The yen tends to gain in times of greater aversion to risk as investors unwind trades in which they use the low-yielding yen to fund investments in higher-yielding currencies.

The yen was under pressure on the crosses, losing ground against the euro and the Australian dollar.

The euro extended its bounce, gaining 0.3 percent to 124.94 yen on trading platform EBS, from Monday’s three-week low of 123.15 yen, with resistance seen around 125.82 yen, the day’s low on April 15, before it dropped sharply on Monday.

It dipped 0.1 percent to $1.3480.

Concerns about Greece’s debt crisis are never far away and it faces its next funding test on Tuesday with an auction of 1.5 billion euros of 13-week Treasury bills.

Asia Rates, G20 Caution

The Australian dollar edged up after minutes of the Reserve Bank of Australia’s (RBA) April policy meeting showed it felt it was not prudent to delay a hike given an expected boom in the country’s terms of trade.

Asian markets were also waiting to see if the Reserve Bank of India (RBI) raises rates and by how much, after tightening by Singapore last week fuelled yuan revaluation talk and sent the dollar down across the board.

“As far as Asia is concerned people are looking for signs of tightening and if the RBA and the RBI are hawkish, there may be a feeling that other central banks in Asia are going to follow fairly soon,” said Gerrard Katz, regional head of FX trading in North Asia for Standard Chartered.

In contrast, the New Zealand dollar fell as benign inflation data suggested there was no urgent need to lift rates, leading investors to scale back expectations for when policy may tighten.

The Aussie rose 0.3 percent to $0.9283, testing resistance from moving averages on the hourly chart at that level, while the kiwi fell 0.5 percent to $0.7102 after the inflation data.

The dollar index, a gauge of the greenback’s value against a basket of currencies, was flat at 80.98 after pulling back from a high of 81.28. It had gained broadly on Monday after the Goldman news sparked a bout of risk aversion.

Goldman faced rising regulatory and legal pressure on Monday as allegations that the bank duped clients fuelled momentum for regulatory reform on both sides of the Atlantic.

Traders said this made building positions difficult as political events include a Group of 20 financial leaders meeting in Washington later this week, which could impact the debate over financial regulation.

“We have the G20 later this week and it feels like regulators and politicians are going to be looking to tighten up control on banks, so it’s hard to see much recovery in stocks and it could be a bit of a choppy trading week,” said Katz in Hong Kong.