High-Flying Euro Hits Record Peak Vs Yen

Reuters ^ | December 30, 2004 | Katie Hunt

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LONDON (Reuters) - The euro hit a record high against the yen on Thursday and remained within sight of this week's all-time peak versus the dollar as its bull run continued a thin market.

The single currency rose above 141.60 yen in thin Tokyo trade, extending Wednesday's gains on technical moves and on concerns that Sunday's tsunami that has killed over 85,000 people around the Indian Ocean could hurt economic growth throughout Asia.

"I think the tragic events that have occurred over the past few days in Southeast Asia may be having an impact on the yen," said Kamal Sharma, foreign exchange strategist at Dresdner Kleinwort Wasserstein..

"There's some investor uncertainty of what the implications for regional growth in that area will be and that's weighing on yen sentiment," he added.

By 3:40 a.m. EST, the euro stood at 141.33 yen, slightly higher compared with late Wednesday levels in New York, while the dollar was steady at 103.69 yen.

The euro stood at $1.3629 against the dollar, up slightly on the day and close to a record high of $1.3647 set in the previous session, according to data on electronic trading platform EBS.

Sterling clung near 14-month lows against the euro after data showed that British house prices fell for the second time in three months in December, bringing the annual rate of increase down its lowest level in nearly three years.

The euro was unruffled by comments from German Chancellor Gerhard Schroeder, who said in a newspaper article that persistent U.S. dollar weakness is a concern and stability in foreign exchange markets requires a correction of global economic imbalances.

THREE YEAR DECLINE

Traders and investors expect the dollar to extend its roughly three-year decline against other major currencies in 2005 due to the swelling and record U.S. current account deficit.

"Although it looks as if it's the euro's day, what's driving the single currency higher is not fundamentals in the euro zone but structural problems in the United States," said Shogo Nagaya, forex manager at Nomura Trust and Banking. The dollar is expected to face fresh selling pressures across the board at the start of the new year."

The euro has risen some 10 percent against the dollar since mid-October, while the greenback is down 6 percent against the yen over that time.

Exchange rates were choppy in thin volume between Christmas and the New Year holiday and investors were hesitant to take big positions.

The market is waiting for monthly data from Japan's Finance Ministry on intervention at 1000 GMT, which traders expect to confirm that no intervention was conducted in December.

Japanese authorities, who sold 35 trillion yen ($337.3 billion) in 2003 and early this year to curb yen strength seen as threatening exports, regularly warn against rapid rises in the yen but are believed to have refrained from large-scale intervention since March.

Earlier this week, Finance Minister Sadakazu Tanigaki said officials would monitor the foreign exchange market over the New Year's holidays.

Markets are also awaiting reports on Thursday, including U.S. jobless claims figures and an index of Chicago-area business conditions, to gauge the strength of the U.S. economy. But economic data has mattered little in recent months as the market has focused on the U.S. deficits.

"Cyclical factors are not playing into the market at the moment," Ashley Davies, a currency strategist at UBS in Singapore, said.