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FOREX-Yen favoured as sagging stocks and oil generate safety bids

Published 24/02/2016, 11:24 am
© Reuters.  FOREX-Yen favoured as sagging stocks and oil generate safety bids
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* Oil slides, drags stocks lower after Saudis rule out output cut

* Soft U.S. data, dovish comments from Fed official weigh on USD

* Canadian, Australian dollars sag as oil resumes falling

By Shinichi Saoshiro

TOKYO, Feb 24 (Reuters) - The yen stood firm against key peers like the dollar and euro on Wednesday as sagging stocks and crude oil drove bids for the safe-haven currency.

Undercutting upward momentum for equities, oil prices retraced earlier gains made at the week's start and tumbled on Tuesday after Saudi Arabia ruled out production cuts.

The euro hovered close to 123.09 yen EURJPY= , a near three-year low hit on Tuesday. The dollar was flat at 112.05 yen JPY= after losing 0.7 percent overnight, with mixed U.S. data and dovish comments from a Fed policymaker weighing on the greenback.

An unexpected rise in January U.S. home sales was tempered by a fall in consumer confidence while Dallas Federal Reserve chief Robert Kaplan told the Financial Times that the central bank may need to keep interest rates unchanged for an "extended period" to give inflation time to rise back to the its 2 percent target. euro was little changed at $1.1023 EUR= after dipping to about a three-week trough of $1.0990 overnight.

"The euro came under pressure but the magnitude of its decline was nominal compared to other major currencies because of risk aversion and the fact that $1.10 is being defended aggressively," wrote Kathy Lien, managing director of FX strategy for BK Asset Management.

"However weaker economic data and the risk of Brexit should lead to further losses in the currency."

The possibility of Britain leaving the European Union continued to buffet the pound, which nudged down to a fresh seven-year low of $1.3986 GBP=D4 .

The pullback in global risk appetite and sliding oil prices dragged down commodity-linked currencies like the Australian dollar.

The Aussie was down 0.1 percent at $.7194 AUD=D4 . The previous day it had reached $0.7259, the highest since early January on a rise in iron ore, Australia's key export.

The Canadian dollar, another commodity-linked currency, steadied at C$1.3797 CAD=D4 per dollar after shedding 0.6 percent on Tuesday as crude oil slid. (Editing by Sam Holmes)

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