Last updated: January 16, 2013 9:39 pm

Currency havens rise in cautious trade

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Currency havens gained ground on Wednesday as comments from politicians swung markets and traders continued to take profits on popular trends, with the US dollar and Japanese yen rising against risk-related currencies.

The yen hit a one-week high of Y87.77 against the dollar following a warning from Japan’s economy minister the previous day that a weaker yen could harm the country’s importers, even as other Japanese politicians sought to reinforce the government’s stance on weakening the yen.

Yoshihide Suga, chief cabinet secretary, said on Tuesday that the yen was still correcting its excessive rise and that the government’s “top priority” remained fighting deflation and a higher yen. The dollar recovered during European and US trading to about Y88.50.

The euro fell against the dollar after Jean-Claude Juncker, chairman of a group of eurozone finance ministers, said on Tuesday evening that the single currency was “dangerously high”. The single currency fell 0.3 per cent to $1.3256, its lowest level since the European Central Bank kept rates on hold last week, but later recovered and was flat against the dollar at $1.33.

BNY Mellon said its flow data showed that real money investors had not yet bought into the broader euro rally this year, but had instead been paring their exposure to the single currency.

The US dollar rose against most other major currencies as risk aversion dominated trading. The Australian dollar fell 0.1 per cent to $1.0558. 

Sterling fell 0.4 per cent to $1.5973 as currency analysts warned that discussions about whether to hold a referendum over Britain’s membership of the EU was adding to uncertainty for the pound.

“Concerns are building that sterling is on the brink of a sharp fall,” said analysts at Capital Economics in a note. The Swiss franc lost earlier gains after US markets opened, having initially risen against the US currency and the euro. But the dollar was later flat at SFr0.9323 while the euro was just 0.1 per cent lower at SFr1.2392.

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