Dollar gains against yen on higher risk appetite

Dollar gains against yen on higher risk appetite
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First Published: Fri, Mar 30 2007. 12 57 AM IST
Updated: Fri, Mar 30 2007. 12 57 AM IST
The dollar gained sharply against the yen on 29 March, after a final data revision showed the US economy grew more strongly than expected in the fourth quarter of last year.
The report showed the US economy may be more resilient than many thought and supported growing expectations the Federal Reserve may hold interest rates steady for some time and not cut them.
Investors have also re-entered risky carry trades, which involved borrowing the low-yielding yen to fund purchases of assets with higher interest rates such as the Australian and New Zealand dollars.
This reversed Wednesday’s trends. Analysts said this was partly fuelled by statements from Fed chairman Ben Bernanke, who on Wednesday gave a more balanced view of the US economy. He accepted risks from the weak housing market, but also stressed lingering inflationary pressures. The markets interpreted that to mean the Fed is not ready to reduce US interest rates just yet. “There’s a higher risk appetite today partly due to Bernanke and we’re seeing a bid in the high-yielders including the dollar,” said Kathy Lien, chief currency analyst, DailyFX.com in New York.
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First Published: Fri, Mar 30 2007. 12 57 AM IST
More Topics: Money Matters | Currency |