Yen stronger as investors back away from risk

Story link: Yen stronger as investors back away from risk

The yen strengthened on Tuesday as global about worries concerning the US subprime mortgage sector led investors to reduce the number of carry trades they were willing to enter into. In addition, Japan’s finance minister made remarks indicating that investors should remain aware of the risk of what he called “one-way currency trading”, an oblique reference to carry trades. Analysts, however, agreed that the remarks were not meant to influence investors to abandon the risky investments.

At midday in New York, the yen had added 0.3 percent to ¥246 in relation to sterling, while it had gained 0.5 percent to ¥123.10 versus the US dollar and was also 0.5 percent higher to ¥165.70 against the euro.

The US dollar held relatively steady in relation to the shared currency even though a new consumer confidence survey and May new home sales figures were both weaker than had been anticipated. The greenback traded at $1.3460 versus the euro.

Sterling added 0.1 percent to $1.9990 on the dollar after having gone as high as $2.0016 earlier in the session. The gain came ahead of a survey of the UK retail sector, due on Wednesday. Analysts believe that if that survey is strong it will increase the chances that UK interest rates will climb again before the end of the year and support sterling in its efforts to permanently breach the $2 level in relation to the greenback.