Yen selling pauses, more weakness likely in store

By Staff
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TOKYO, Apr 17 (Reuters) The yen hung near a record low against the euro and a seven-week trough versus the dollar on Tuesday and was expected to stay pressured after the Group of Seven appeared to give a green light to yen selling.

The euro traded around 161.90 yen not far from an all-time high 162.43 yen touched on Monday, when the yen tumbled across the board after G7 finance officials at the weekend glossed over the issue of the yen's recent weakness.

The yen inched up slightly as traders booked profits on gains in other currencies, given that the euro has leaped as much as around 3 percent versus the yen so far this month while the dollar has strengthened more than 1.5 percent.

But market participants said any respite for the low-yielding yen would be fleeting as investors dump the currency for higher-yielding currencies and assets as part of trading strategies such as the carry trade.

''The yen remains weak,'' said Tomoko Fujii, a senior economist and strategist at Bank of America in Tokyo.

''The G7 was a non-event, and thus far we've seen nothing to stop the move'' to sell yen, she added.

The dollar slipped around 0.1 percent to 119.60 yen but stayed near a seven-week high hit on Monday as market participants said yen weakness was outweighing softness in the dollar, which has been hit by the view that the Federal Reserve may cut rates later in the year.

The high-yielding Australian dollar was slightly lower at 99.55 yen but it still hovered near 100 yen, a level last seen 10 years ago. The New Zealand dollar pulled back a touch versus the yen after hitting a 17-year high on Monday.

''The yen has fallen a lot recently, so the time is ripe for a bit of profit taking,'' said Hiroshi Yoshida, a foreign exchange trader at Shinkin Central Bank.

But he added that there were few reasons to buy the yen at the moment, which was likely to keep the currency vulnerable to more selling.

Japanese Finance Minister Koji Omi said on Tuesday that recent moves in the currency market reflected not so much a fall in the yen as a rise in the euro.

MORE EURO STRENGTH Analysts say the euro will continue to climb on the view that the European Central Bank may raise rates in June and beyond.

This view helped the euro stay strong against the dollar, and the single currency traded around $1.3540 little changed on the day and hovering near a two-year high of $1.3578 hit on Monday.

The U.S. currency stayed on the back foot against other high-yielding currencies such as sterling, which traded near its highest level since 1992, and the Australian dollar, which hit a 17-year peak on Monday.

''The recent trend is to sell the dollar against the euro and higher-yielding currencies and sell the yen on the crosses, which keeps the pair of weak currencies, dollar and yen, in ranges,'' said Kaoru Kondo, chief foreign exchange analyst at Fisco.

Traders awaited data on British inflation due later in the day to see whether rising consumer prices may prompt the Bank of England to raise rates to 5.5 percent as soon as in May, which would take its rate above the Federal Reserve's 5.25 percent.

Meanwhile, Germany's ZEW research institute will release its investor sentiment indicators for April later in the session.

Morale is seen improving for the fifth month running.

Also in focus will be U.S. consumer price figures and housing starts data on Tuesday, as market participants will want to see if price pressures are rising even as the housing market keeps slowing, which may have a negative impact on the economy.

Core CPI is expected to climb 0.2 percent on the month, matching February's gain, according to a Reuters poll.

REUTERS SR HT1130

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