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Sunday, February 8, 2009

Yen rises as Japanese buy

TOKYO, Feb 9 (Reuters) - The yen rose against the dollar on Monday with demand from Japanese exporters lending support after it earlier hit a one-month low as gains in stock markets pointed to an easing of risk aversion.

The dollar hit a one-month high against the yen earlier as the Japanese currency carried over its weakness from Friday, when U.S. shares rallied even as data showed that U.S. job losses in January were the deepest in 34 years.

"The rise in equities caused risk aversion to wane and triggered selling of the yen," said a trader for a Japanese bank.

But the dollar later shed its gains against the yen due to selling by Japanese exporters, traders said.

The dollar fell 0.3 percent against the yen to 91.73 yen. The dollar earlier rose to 92.42 yen on trading platform EBS, its highest since early January.

In the near term, currencies are seen likely to take their cues from how the stock market reacts to President Barack Obama's financial stability plan, to be outlined by Treasury Secretary Timothy Geithner in a speech at 1600 GMT on Tuesday. The stabilisation steps were initially due to be unveiled on Monday, but the the Obama administration pushed back the announcement as it pressed lawmakers to settle their differences over a huge economic stimulus package.

Market players said the dollar broke above a triangle pattern against the yen on technical charts late last week, suggesting it may have more room to rise.

One possible scenario is for the dollar to rise towards 94.00 yen within a week, but whether that will be the case remains to be seen, said Minoru Shioiri, chief manager of foreign exchange trading for Mitsubishi UFJ Securities. "That is what technical factors suggest, but if you ask whether there are other factors out there that lend credence to that view, or whether this is a situation where people can head openly toward risk-taking, that's difficult," Shioiri said.

Besides the market's reaction to the U.S. financial stabilisation measures, another focal point will be whether there is fund repatriation by Japanese investors, Shioiri said.

Since February is a month when there is a relatively large amount of coupon payments on U.S. Treasuries, there is focus on the potential for dollar selling by Japanese players, he said.

Some $25 billion in coupon payments in U.S. Treasuries are due on Feb. 15, according to U.S. Treasury Department data. In addition, there is $36 billion in maturing coupon securities due that day.

Market players are focusing on whether Japanese institutional investors will try to repatriate overseas assets ahead of their financial year-end book closings at the end of March.

There was little currency reaction to data showing that Japan's current account surplus fell 92.1 percent in December from a year earlier, and that Japan's core private-sector machinery orders fell by a smaller-than-expected 1.7 percent in December.

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