Yen pressured by carry trade, dollar hit by mkt turmoil
Sunday, 24 June 2007
NEW YORK, June 23 (AFP): The dollar was roiled yesterday by turbulence affecting the stock and bond markets while the euro set another all-time high against the yen, which felt more pressure from the so-called carry trade.
Europe's single currency hit a record 166.83 yen compared with 165.61 yen in New York late Thursday.
Meanwhile, the dollar shot past 124 yen for the first time since December 2002, stretching as high as 124.03 yen. The greenback then eased back to 123.87 yen compared with 123.70 yen Thursday.
The euro climbed to 1.3467 dollars from 1.3387 a day earlier. In late New York trade, the dollar stood at 1.2293 Swiss francs from 1.2414 Thursday. The pound rose to 1.9992 dollars from 1.9923.
Diminishing expectations for a rate hike in Japan pushed the yen lower against other major currencies, traders said.
The prospects for an extension of the ultra-low interest rates in Japan ignited more carry trades, in which traders borrow yen to invest in higher-yielding assets elsewhere.
"No matter which way you slice it, carry trades refuse to die," said Kathy Lien at Forex Capital Markets.
"It has become glaringly apparent that regardless what warnings finance officials spew, the selling of yen against all major currencies remains unabated," added Andrew Busch at BMO Capital Markets.
The dollar was dented by the rocky road for the US stock market. "The Dow, bond yields and the US dollar went from being up strongly yesterday to being down strongly today," Lien said.
US share markets were roiled by concerns that mortgage failures in the subprime market may be spreading to the broader financial sector. Bear Stearns said it was bailing out a hedge fund it manages with a loan of 3.2 billion dollars.
Europe's single currency hit a record 166.83 yen compared with 165.61 yen in New York late Thursday.
Meanwhile, the dollar shot past 124 yen for the first time since December 2002, stretching as high as 124.03 yen. The greenback then eased back to 123.87 yen compared with 123.70 yen Thursday.
The euro climbed to 1.3467 dollars from 1.3387 a day earlier. In late New York trade, the dollar stood at 1.2293 Swiss francs from 1.2414 Thursday. The pound rose to 1.9992 dollars from 1.9923.
Diminishing expectations for a rate hike in Japan pushed the yen lower against other major currencies, traders said.
The prospects for an extension of the ultra-low interest rates in Japan ignited more carry trades, in which traders borrow yen to invest in higher-yielding assets elsewhere.
"No matter which way you slice it, carry trades refuse to die," said Kathy Lien at Forex Capital Markets.
"It has become glaringly apparent that regardless what warnings finance officials spew, the selling of yen against all major currencies remains unabated," added Andrew Busch at BMO Capital Markets.
The dollar was dented by the rocky road for the US stock market. "The Dow, bond yields and the US dollar went from being up strongly yesterday to being down strongly today," Lien said.
US share markets were roiled by concerns that mortgage failures in the subprime market may be spreading to the broader financial sector. Bear Stearns said it was bailing out a hedge fund it manages with a loan of 3.2 billion dollars.