Yen falls on weak data, dlr extends gains vs euro

TOKYO, June 8 (Reuters) The yen fell broadly today morning in Asia after a weaker-than-expected reading in Japan's machinery orders raised concern that corporate capital spending may lose steam in the months ahead.

At the same time, the dollar extended its gains against the euro after staging a broad-based rally the previous day as rising US government bond yields provided a big potential draw for overseas investors.

Japan's core machinery orders, a highly volatile figure regarded as a leading gauge of capital spending, rose 2.2 per cent in April from the previous month, government data showed today. That was below forecasts for a 4.5 per cent increase.

Still, few analysts thought the machinery data would affect monetary policy decisions by the Bank of Japan.

''The fall in the yen seems to be more to do with yen selling from Japanese individual investors,'' said Masafumi Yamamoto, currency strategist at Nikko Citigroup.

Tired of low interest rates at home, Japanese individual investors have been snapping up assets abroad, helping push down the yen against high-yielding currencies such as the Australian dollar New Zealand dollar and sterling.

Forex traders also kept an eye on equities markets as global stock sell-offs in recent sessions have prompted US-based investors to liquidate some foreign equity holdings, benefiting the dollar.

The yen got a boost the previous day as a fall in European and US shares cut demand for risky trades such as yen carry trade, in which investors borrow low-yielding yen to fund purchases of overseas assets offering higher returns.

The dollar rose as much as 0.25 per cent against the yen to 121.30 yen today from around 121.00 in late New York trade on Thursday.

The euro dipped to $1.3420 from around $1.3435 in late US trade, off a three-week high of $1.3555 hit earlier in the week.

The euro climbed to 162.65 yen from near 162.50 yen.

The benchmark 10-year Treasury yield on Thursday climbed above the psychologically key 5 per cent line and hit its highest since July 2006.

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