Currency news - Credit fears support yen

Credit fears support yen - 29-08-07

The yen will gain further support if there is a sustained slide in global stock markets and increased credit fears surrounding the global banking sector. Institutional dollar buying is likely to increase below the 113.60 level.

Credit concerns continued to dominate in Asian trading on Wednesday as regional stock markets fell sharply and the yen briefly strengthened through the 114.0 level. Asian markets were unsettled by reports that exposure to CDO securities were larger than expected at the Singapore-based DBS bank. As well as reported credit concerns, there have also been increased fears that further bank exposures to credit-related losses will be revealed over the next few days and uncertainty is undermining investor confidence.

Market tensions are liable to remain high in the short term which will provide important underlying yen support. Any dollar losses to below the 112.0 level would risk verbal intervention by the Japanese Finance Ministry. There is also likely to be institutional dollar buying below the 114.0 level which will provide important US currency protection, especially with Japanese funds looking to invest funds overseas before the end of August.

Tim Clayton
Investica Ltd
E-mail: tim.clayton@investica.co.uk
+44 (0) 1452 781001

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