Yen adds as risk assets wobble
LONDON: Major commodity-linked currencies including the Australian and New Zealand dollars chop and the yen rose on Friday after a downbeat session for oil prices and Asian stock markets underlined nerves about global growth and finances.
Sterling also traded a touch lower as some EU leaders dug in their heels in summit talks over a new deal for Britain that the government in London said it needs to campaign against a referendum vote to leave the bloc.
The yen, the chief beneficiary on currency markets of the worst start to a year for stocks since 2009, hit a 2-1/2 year high of 125.095 yen per euro. The dollar dipped back below 113.00 yen, leaving the Japanese currency 0.3 percent stronger on the day at 112.88. JPY=
The Aussie dollar fell 0.7 percent to $0.7105, hurt by suggestions by central bank board member John Edwards in the Wall Street Journal that the currency was too strong for the bank’s liking. The New Zealand dollar was down 0.4 percent at $0.6618.
“The oil chart failed a bit yesterday so we have had a wobble and the yen is the wobble currency of choice,” said Richard Benson, head of portfolio management at currency fund Millennium in London.
“I think we’re really hinging on risk markets, whether we can have a short squeeze into the end of the month. I’m quite constructive on risk into the G20 next week.”
The big issue going into the weekend is sterling and how it reacts to a series of potential triggers on Prime Minister David Cameron’s efforts to find a strong new deal on Europe that can keep other major players in his Conservative party on side.
Benson said there was the risk that a sterling sell-off might drag the euro down with it against the dollar.
Signs overnight were that EU leaders were resisting some of Cameron’s demands and sterling traded down 0.3 percent at $1.4285 around midday in Europe. It was down 0.3 percent against the euro at 77.71 pence.
“It does seem to be on a knife edge and several people I’ve talked to this morning are ready to dump sterling if anything goes wrong,” said a trader with a London bank.
Some traders also wonder whether the aftermath of the Brussels summit will see a smooth adoption of Cameron’s deal by all of the high-ranking colleagues of his Conservative Party. A defection to the “Brexit” side by London Mayor Boris Johnson or another senior Tory would also be likely to hurt sterling.
The euro was steady at $1.1113 after slipping to a two-week low of $1.1071 overnight. Traders said a break below those levels could send the single currency back towards $1.0950.
Thursday’s minutes of the European Central Bank’s January meeting had the market again looking for more weakness in the euro against the dollar ahead of a March meeting now widely expected to deliver further policy easing.