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Yen Under Pressure as Syria Concerns Wane - (Reuters)

Posted by Chris Advincula on Sep 10, 2013 7:29:00 AM

* Safe haven yen slips as risk of strike on Syria diminishes

* Dollar stays under pressure with Fed policy outlook unclear

* Next week's Fed meeting main focus for markets

By Anooja Debnath

LONDON, Sept 10 (Reuters) - The yen slid to a seven week low against the euro on Tuesday, reflecting an easing of concerns over Syria that drew investors back into higher-yielding assets which have suffered from worries over geopolitical strife.

U.S. President Barack Obama did not completely take the plan to attack Syria off the table in response to proposals from Russia overnight but he said plans to make Syria hand over its chemical weapons could be a breakthrough.

The euro gained 0.6 percent to 132.70 yen in response, the highest since late July, and was in sight of a 3-1/2 month record of 132.745 yen.

The dollar also rose 0.5 percent against the yen to 100.07 yen and 0.1 percent against the Swiss franc to 0.9335 francs.

The U.S. currency, however, was broadly under pressure after last week's disappointing U.S. jobs data increased uncertainty about the timing and pace of the U.S. Federal Reserve's plans to scale back its stimulus.

"The news about Syria has had an effect on risk sentiment, so we see the yen and Swiss franc under pressure," said Marcus Hettinger, global FX strategist at Credit Suisse.

"We will likely see a further consolidation in the dollar which remains weak after last week's softer payroll report. Markets will now look to next week's Fed meeting,"

A Reuters poll on Monday showed economists expect the Fed to announce a modest reduction to its $85 billion monthly asset-buying programme by some $10 billion.

San Francisco Federal Reserve Bank President John Williams said on Monday he is yet to make up his mind on supporting a reduction at the Fed's meeting next week.

The dollar index, which tracks the greenback against a basket of six currencies, was up 0.1 percent at 81.911, still close to a near two-week low of 81.697 touched on Monday.

The dollar's slip helped the euro which was flat at $1.3255, but was trading close to Monday's peak of $1.3281, its highest since Aug. 29, according to Reuters data.

Strong technical support lies around $1.3220, said Mitul Kotecha, Hong Kong-based global head of foreign exchange strategy at Credit Agricole Corporate and Investment Bank, in a research note.

The euro has "easily quashed expectations that it would face a difficult time in the wake of a weaker growth trajectory and ongoing peripheral worries," Kotecha said.

Strategists, however, warned the euro could suffer from a row over the political future of billionaire former leader Silvio Berlusconi in Italy which threatens to topple its ruling coalition government.

Minutes of the Bank of Japan's August policy-setting meeting released on Tuesday showed many members believed the central bank's massive government bond purchases are restraining long-term interest rates.

The yen, which has shared a strong negative correlation this year with Japanese stocks, slipped after the Nikkei closed at a 5-1/2 week high, buoyed by the Tokyo's winning bid to host the 2020 Olympics.

 

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