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FOREX-Yen droops to near 4-month low, Aussie hits 1-month high

Published: November 2, 2012 | 8:07 am
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* Upbeat US private payroll data boosts risk appetite
* Yen also hampered by Japan’s trade deficit, economic woes
* Break of 80.60-65 could signal further bull trend for dollar/yen
* Aussie hits 5-week high as China worries ease
* Euro under pressure after Greek court ruling on austerity steps

TOKYO/SYDNEY – The yen sagged to near a four month-low on Friday while commodity currencies held firm as investors bet on an upbeat U.S. payrolls report after private employers added jobs at the fastest pace in eight months.

The euro was under pressure after a Greek court ruled the pension reform demanded by foreign lenders may be unconstitutional, raising concerns about Athens’s ability to implement the austerity measures needed to secure bailout money.

U.S. payrolls processor Automatic Data Processing said private employers added 158,000 workers last month, bolstering hopes that a closely-watched nonfarm payrolls report due at 1230 GMT would also surprise on the upside.

That saw the yen come under broad pressure, and lit a fire under commodity currencies like the New Zealand dollar.

The greenback bought 80.25 yen, up about 0.2 percent from late U.S. levels, having powered to a high of 80.295, just shy of last week’s four-month high of 80.38.

A break of major resistance at 80.60-65, triple top marked between May and June as well as a 50 percent retracement of its decline from March to September, would be seen as a major bullish signal on charts.

The yen has its own grief as well because recent Japanese data and most corporate earnings have been soft, and third-quarter gross domestic product, with data due on Nov. 11, is also likely to have contracted.

“The Japanese electronics industry is collapsing. Auto exports to China will be falling sharply. So Japanese exporters’ dollar selling will be dwindling… There’s no reason to be bullish on the yen,” said a trader at a Japanese brokerage.

The market’s near-term focus is firmly on U.S. jobs. A Reuters poll showed analysts expect a rise of 125,000 U.S. nonfarm payrolls in October. The unemployment rate is seen ticking up to 7.9 percent.

“More important will be the unemployment rate we think, and whether the sharp fall in September, from 8.1 percent to 7.8 percent, is reversed,” said Kiran Kowshik, strategist at BNP Paribas.

“A print of 8.0 percent or above could weigh on USDJPY.”

Still, Kowshik said market reaction to the jobs data will probably lack conviction given the proximity of the Nov. 6 U.S. Presidential election and the Nov. 8 Chinese Congress that will usher in a new generation of leaders.

END OF CHINA SLOWDOWN?

Commodity currencies were big winners, with the Australian dollar hitting five-week high of $1.0420 before giving up gains to stand at $1.0383. Against the yen, it matched its August peak of 83.55 yen.

The currency was helped by improvement in Chinese manufacturing data on Thursday, which raised hopes the worst may be over in China, Australia’s biggest export customer.

Other U.S. data out on Thursday, including a drop in new claims for jobless benefits and a sharp improvement in consumer confidence, also underpinned risk appetite, which helped U.S. stocks rise more than 1 percent.

Left out of the risk rally was the euro, which was undermined by fresh worries about Greece.

The Court of Auditors in Greece, which vets Greek laws before they are submitted to parliament, said measures such as increasing the retirement age by two years to 67 and cutting pensions by between 5 and 10 percent could be against the constitution.

The single currency slipped 0.4 percent in Asia to $1.2893 , as traders sold the currency with aim of triggering an option barrier at 1.2880.

Still it remained well within the $1.2800-3200 range seen since September as the European Central Bank’s pledge to buy Spanish bonds if the country applies for aid kept bears at bay.

“Those who needed to reduce euro assets have already done so by now, so the currency is likely to stick to its range,” said the Japanese brokerage trader.

In a sign of fading concerns over a catastrophic crisis in the euro zone, implied volatility on one-month euro/dollar options fell to fresh five-year lows around 7.50 percent .

reuters

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