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FOREX-Yen holds gains, European political risks generate safe-haven demand

Published 07/02/2017, 02:57 pm
Updated 07/02/2017, 03:00 pm
FOREX-Yen holds gains, European political risks generate safe-haven demand

* Yen holds broad gains vs dollar, euro, pound, Aussie

* Dollar/yen hits 10-week low, U.S. trade data next in focus

* French political woes hit euro, other EU election risks weigh

* Aussie pares modest losses after RBA policy decision (Updates prices, adds details and quotes)

By Shinichi Saoshiro

TOKYO, Feb 7 (Reuters) - The yen held large gains against a number of peers on Tuesday as investors sought refuge in the safe-haven Japanese currency amid a latest rise in European political concerns.

The dollar traded at 111.930 yen JPY= after slipping to 111.590, its lowest since Nov. 28. The euro fetched 119.910 yen EURJPY= following a dip earlier to a two-month low of 119.750.

The Australian and New Zealand dollars and the pound also gave ground to the buoyant yen.

The Japanese currency had rallied versus the dollar the previous day on an increase in risk aversion, dragged down as U.S. Treasury yields fell in tandem with Wall Street shares and crude oil prices.

It also attracted demand thanks to the latest rise in investor caution towards European political developments generated after France's far-right National Front leader Marine Le Pen on Monday launched her presidential bid, vowing to fight globalisation and take France out of the euro zone.

French government bond yields rose sharply and European stocks fell amid perceived risks to the already strained European political establishment. drop in euro zone equities and the rise in European and U.S. bond yields are pushing up the yen," said Yukio Ishizuki, senior currency strategist at Daiwa Securities.

"In comparison to last week, the yen's appreciation has been significantly more widespread. But as the steadiness in some emerging market currencies show, it has not been a one-way 'risk off' event," he said.

The euro extended overnight losses and was down 0.3 percent at $1.0725 EUR= , in reach of a one-week low of $1.0713 set the previous day. The latest decline pulled the euro further away from an eight-week high of $1.0829 scaled on Thursday against a broadly weaker dollar.

Apart from France, investors also have to factor in elections in other parts of the European Union this year.

Dutch and German elections will be held in March and September. Another presidential election looms in Italy, even as former Italian prime minister Matteo Renzi said he was willing to shelve his push for early voting. euro's struggles did not give the dollar much traction against the yen.

The U.S. currency has fallen 4.5 percent against the yen so far this year, hurt in large part by U.S. President Donald Trump's protectionist trade rhetoric and his readiness to see the United States end a two-decade old "strong dollar" policy.

The greenback had taken a knock after Trump and his top trade adviser Peter Navarro last week criticised Germany, Japan and China, saying the trading partners were engaged in devaluing their currencies to U.S. disadvantage.

Immediate focus fell on U.S. trade data due later in the session. ECONUS

"With the protectionist trade stance the United States is seemingly poised to adopt now a key market theme, the December U.S. trade data due later today garners attention," said Masafumi Yamamoto, chief FX strategist at Mizuho Securities in Tokyo.

"A trade deficit that exceeds forecasts would weigh on the dollar by raising caution in the market towards top U.S. officials, who may speak out against perceived dollar strength."

The Australian dollar pared earlier modest losses and inched up 0.1 percent to $0.7668 AUD=D4 after the Reserve Bank of Australia left interest rates unchanged and gave a somewhat upbeat assessment of the economy. (Editing by Jacqueline Wong and Sam Holmes)

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