Yen pulls back from 14-year high vs. greenback on intervention fears
By William L. Watts & Lisa Twaronite, MarketWatch
LONDON (MarketWatch) -- The U.S. dollar and the Japanese yen trimmed gains but remained higher versus major rivals Friday, benefiting from their safe-haven status in the face of mounting worries Friday over the potential financial fallout from Dubai's debt problems.
The dollar index (DXY 75.35, +0.52, +0.70%) , which measures the greenback against a trade-weighted basket of six major currencies, was at 75.319, up 0.7% on the day.
The euro fell 0.8% versus the U.S. dollar to $1.4889, while the British pound declined 0.8% against the U.S. unit to $1.6374.
The euro lost 0.8% against the Japanese currency to trade at 128.78 yen. The U.S. dollar, meanwhile, bounced off a 14-year low at 84.82 yen to trade at 86.46 yen, up 0.1% from Thursday, after Japan's finance minister indicated the government would be willing to stake steps to limit the yen's appreciation.
European equity markets were mixed Friday, while U.S. stock index futures pointed to sharp losses for Wall Street. Asian shares fell early Friday. See Indications.
While U.S. stocks were closed Thursday for the Thanksgiving holiday, world equity markets sank, the dollar and yen rose and government bonds rallied as Dubai's woes triggered fears of renewed financial turmoil.
State-controlled Dubai World, the emirate's largest corporate entity, late Wednesday asked creditors for a six-month stay on debt repayments. Dubai World's liabilities total around $60 billion.
"A big aspect of this is positioning, and the world and his wife has had a negative view on the dollar, and therefore most people were positioned that way," said Russell Jones, head of fixed income and currency strategy research at RBC Capital Markets.
That left substantial fodder for a short-covering rally when the Dubai news undercut investor appetite for assets perceived as risky.
High-yielding commodity currencies, which had been the biggest beneficiary of the rise in risk appetite since March, fell sharply Thursday and remained under pressure Friday.
The U.S. dollar rose 1.7% versus the New Zealand dollar to trade at NZ$1.4203.The Australian dollar dropped 1.5% to 89.96 U.S. cents, having traded as low as
Analysts at Bloxham in Dublin said the Aussie's break of uptrend support from the March low was a significant event on the charts.
A further break below 89.00 U.S. cents would complete a "double top" pattern "and imply substantial downside for the Australian dollar and other risk assets," they wrote.
Gold and oil were both under pressure as the dollar rose. See Futures Movers for more on crude futures. See Metals Stocks for more on gold futures.
The Japanese government is worried that a strong yen could undermine the fragile economic recovery here. Read Asia Markets for more on effects of strong yen on Japanese exporters.
Japanese Finance Minister Hirohisa Fujii reportedly said at a news conference Friday that recent foreign-exchange rate moves were one-sided and he would not rule out taking steps if they continued.
"If this kind of situation is sustained, I think that it would be something abnormal," Fujii said, according to Dow Jones Newswires. He added, "It would be possible for us to take" steps under such conditions.
Fujii said he was "extremely nervous and watching the market carefully," according to Reuters, saying, "there's no doubt the market has moved too far in one direction."
While most analysts think there is little possibility that Japan will intervene unilaterally to stem its currency's rise, Fujii's warning helped pull the greenback off its record low.
