Yen drops as US bank plan spurs risk taking
The yen fell sharply in Asia on Tuesday as speculators bought riskier assets after Washington cheered markets with a plan to purge US banks of toxic debts, dealers said.business Updated: Mar 24, 2009 13:50 IST
The yen fell sharply in Asia on Tuesday as speculators bought riskier assets after Washington cheered markets with a plan to purge US banks of toxic debts, dealers said.
The dollar gained to 98.20 yen in Tokyo afternoon trade from 96.88 in New York late on Monday.
"It seems risk takers began to buy the greenback on the back of their belief that the US economy may start recovering," said Shinkin Central Bank dealer Shinichi Hayashi told Dow Jones Newswires.
The US Treasury Department announced on Monday a plan to buy up toxic assets from ailing banks in a public-private partnership scheme to ease the credit crunch plaguing the US financial system and kick-start the economy.
This boosted investor risk appetite, prompting many players to dump the yen and to buy higher-yielding currencies, said Shoichi Handa, general manager at the forex trading firm SBI Liquidity Market.
The euro rose sharply as investors piled into higher-yielding currencies. Official interest rates in the eurozone stand at 1.50 per cent, compared with close to zero in Japan and the United States.
The European currency climbed to 1.3661 dollars from 1.3630 while hitting a five-month high of 134.14 yen, against 132.28 in New York.
The Australian and New Zealand dollars, as well as the British pound, also flew higher against the Japanese currency.
But dealers said the rally in riskier assets might soon fade unless investors see more signs of an economic recovery.
"The world economy has to really start recovering before you get any truly sustained rises in currencies like the euro and Australian dollar," said Hiroshi Maeba, deputy managing director of forex trading at Nomura Securities.
Against regional Asian currencies, the dollar dropped to 1,383.50 South Korean won from 1,392.20 a day earlier, to 1.5058 Singapore dollars from 1.5099 and to 48.04 Philippine pesos from 48.16.
It fell to 33.75 Taiwan dollars from 33.79 and to 11,430 Indonesian rupiah from 11,630, while edging up to 35.34 Thai baht from 35.24.
First Published: Mar 24, 2009 13:49 IST