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RPT-FOREX-Yen gains after Kuroda sticks to negative rate script

Published 26/09/2016, 05:46 pm
Updated 26/09/2016, 05:50 pm
© Reuters.  RPT-FOREX-Yen gains after Kuroda sticks to negative rate script

(Repeats to additional subscribers)

* Kuroda comments give no sign of near-term threats to yen

* 100 yen per dollar back in crosshairs

* Focus shifts to U.S. presidential debate

* Trump win might aid U.S. currency, hurt peso, Canadian dollar

By Patrick Graham

LONDON, Sept 26 (Reuters) - The yen was holding strong on Monday in the face of another volley of promises from the Bank of Japan to do everything necessary to get inflation back on the rise, including cutting interest rates further into negative territory.

All eyes will be on the first U.S. presidential debate later, with the chances of a Donald Trump presidency, and the protectionist boost for the dollar many analysts think it might imply, moving to the front of investors' minds.

But with the probability of a rise in U.S. interest rates in December seen as unlikely to move swiftly higher, a number of major bank analysts believe the dollar could have peaked for now and may suffer, particularly against the yen, in coming weeks.

"The temptation is to say that the dollar should continue to weaken this week," said Sam Lynton-Brown, a currency strategist with BNP Paribas (PA:BNPP) in London.

"Real yields have pushed much lower and there doesn't seem the potential for the Fed to move market expectations sharply from where they are - around 55 percent for a hike in December."

By 0715 GMT, the dollar had fallen 0.4 percent to 100.63 yen JPY= . The euro also nudged up 0.1 percent to $1.1234 EUR= , adding to Friday's modest gains made after the release of relatively upbeat euro zone flash composite purchasing managers' index.

Bank of Japan Governor Hiruhiko Kuroda's commitment to use all tools necessary to get inflation back to its 2-percent target did little to shift the conviction among bank analysts that Tokyo is increasingly impotent. Lynton-Brown said that moves in the dollar-yen rate were likely to be guided more by the U.S. side of the equation than anything Japan could do in the weeks ahead.

In that light, some say the first of three debates between U.S. presidential candidates Trump and Hillary Clinton has the potential to move the dollar.

"We still see the euro and yen especially appreciating further," Citi analysts said in a morning note.

"The big risk to this view is the upcoming U.S. Election. A A Trump presidency would likely be destabilizing for emerging currencies based on his strong views on China, Mexico, and trade policy in general."

Among the currency majors, Elsa Lignos, a senior strategist with RBC Capital Markets, underlined the exposure of the Canadian dollar to a Trump presidency.

"The outcome of the debate will be watched most closely for the Mexican peso, but we still argue the Canadian dollar is the currency that is really underpriced for US election risk," she said.

The Canadian dollar, already hit by a fall in crude oil prices on Friday, was down 0.15 percent on the day at C$1.3183. CAD=

(Editing by Toby Chopra)

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