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FOREX-Yen surges as rand tumbles in early Asia, eyes on yuan

Published 11/01/2016, 11:02 am
Updated 11/01/2016, 11:10 am
© Reuters.  FOREX-Yen surges as rand tumbles in early Asia, eyes on yuan
USD/JPY
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* Rand falls by as much as 10 pct to record low vs dollar

* Japan retail trader stop-losses add to rand fall-trader

* Yen climbs broadly, hits 4-1/2 month high vs dollar

By Masayuki Kitano

SINGAPORE, Jan 11 (Reuters) - The safe haven yen surged in early Asian trade on Monday as the South African slid, underscoring the risk-averse mood that has prevailed in markets since the start of the year as China has allowed the yuan to sharply weaken.

All eyes were on China's mid-point fixing for the yuan at 0115 GMT, after the central bank strengthened the official rate for the first tine in nine trading days on Friday.

"The RMB's behaviour over the past week has been difficult to predict. Different signals about FX policy have wrong footed market participants and we are wary in believing that an immediate calmness will soon emerge," HSBC said in a weekend note.

"In this context, we expect RMB volatility to remain high while depreciation pressures are likely to remain strong."

The rand fell as much as 10.3 percent against the U.S. dollar to a fresh record low of 17.9950 rand ZAR=D3 and was last trading at 16.8500.

The rand had already been under pressure against the dollar after surprisingly strong U.S. jobs data on Friday was seen as supporting the case for the Federal Reserve to raise interest rates again in March.

Against the yen, the rand slid to as low as 6.7147 yen ZARJPY=R , and was last down 4.3 percent from late U.S. trade on Friday at 6.8807 yen.

The fall was caused by "massive liquidation" of global carry trades in the rand, said Jeffrey Halley, FX trader for Saxo Capital Markets in Singapore.

The slide seemed to be partly caused by stop-loss selling by Japanese retail margin traders, Halley said.

Japan's markets were closed for a public holiday.

"Emerging markets (currencies) sold aggressively after Tokyo margin servers turned on at 7 a.m. Tokyo," he said, adding that other emerging currencies such as the Mexican peso were also coming under pressure.

The Mexican peso MXN=D3 weakened to a historic low of 18.01 pesos per dollar amid concerns over China's slowing economy and persistent declines in oil prices. yen gained a lift as emerging market currencies came under renewed pressure, and rose to its highest level since late August against the dollar.

The dollar was last down 0.4 percent against the yen at 116.99 yen JPY= , having fallen to as low as 116.71 yen earlier on Monday.

Risk appetite had been battered globally last week, benefitting the yen, after China guided the yuan sharply lower, stoking worries about the health of the world's second-largest economy and the outlook for global growth.

Surprisingly strong U.S. jobs data on Friday has done little to cheer the mood. Falls in oil prices helped weigh on U.S. equities, which recorded their worst five-day start to a year on record.

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