NEW YORK (AP) — Lifted by a wave of buying against the yen following verbal intervention from Japanese government officials overnight in Tokyo, the euro ended New York trading slightly strongeracross the board Wednesday.
This rise against the yen also supported the dollar against the Japanese currency, although the greenback was mixed against other rivals in a relatively quiet session devoid of major economic indicator releases. And with the U.S. Labor Day holiday on Monday approaching, currencies are expected to stay within narrow ranges.
“This sideways consolidation should continue for a while to come,” said Andrew Chaveriat, a technical analyst at BNP Paribas in New York.
The lackadaisical nature of the market was reflected in its lack of reaction to a 2 percent surge in the gold price to a three-month high of $373.80 a troy ounce.
Late Wednesday, the euro was trading around $1.0880, off its session high of $1.0927 but up front $1.0873 late Tuesday in New York. The euro was also trading around 127.80 yen, up from 127.50 yen, but well off its intraday high of 128.67 yen. The dollar was at 117.45 yen, up from 117.29 yen late Tuesday. Against the Swiss franc it was quoted around 1.4135 francs, up from 1.4091 francs. Sterling was trading at $1.5715, up a little from $1.5700 late Tuesday in New York.
The euro’s better performance was a direct result of comments made overnight by Japan’s top currency bureaucrat Zembei Mizoguchi, who signaled the government is uncomfortable with the yen’s sharp appreciation versus the single currency.
“Much too-rapid moves are undesirable,” said Mizoguchi, Vice Finance Minister for International Affairs, in a veiled reference to the yen’s 8 percent rise against the euro this month alone. “We watch the market very closely and take various measures,” based on market moves, he added, according to Dow Jones Newswires.
This prompted investors to cover short euro and long yen positions, pushing the euro two yen higher during European trading than the five-month low of 126.65 yen hit Tuesday.
The other big market mover catching the attention of currency traders was the surge in gold. The yellow metal rallied as much as $10 on the day to that fresh three-month high. Institutional hedge funds, bullion banks, Commodity Trading Advisors and speculators piled in after it broke key technical resistance at $367 an ounce, dealers said.
“A break above the psychological $400 mark could incite further unrest in both stock and bond markets, unleashing a wave of selling that could spoil chances of a sustainable (economic) recovery,” wrote Jes Black, a currency analyst at MG Financial in a note to clients.
“If gold were to rise above $400 an ounce, it could spur more investors to recognize commodities as an alternative investment class,” he noted. “This could lead to a positive feedback loop, driving inflation higher, bond prices lower (yields higher) and further squeeze U.S. profit margins.”
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Jamie McGeever is a correspondent for Dow Jones Newswires.
