Published: Tue, 14 Apr 2009 21:34:34 +0200

Japanese Yen Moves Higher Against Greenback as Equities Fall

(CEP News) - Negative market sentiment and weaker U.S. equity markets are helping the Japanese yen to make gains against the U.S. dollar Tuesday afternoon.

USD/JPY has been on a strong down trend for most of the session. In overnight moves, the cross hit session highs at 100.43 JPY. The cross consolidated through most of the European session, but was under pressure ahead of the North American open. USD/JPY remains near session lows, under 99.00 JPY.

The rise in the Japanese yen can be linked to a disappointing U.S. retail sales report. Headline retail sales fell 1.1% in March, despite forecasts for a 0.3% increase. The previous month's results were upwardly revised. Meanwhile, retail sales excluding autos fell 0.9% in the month, against expectations for a flat reading.

Although the yen is benefiting from risk aversion sentiment on Tuesday, Nick Bennenbroek, head of currency research at Wells Fargo, said he would be reluctant to look for long-term yen strength.

"I think there is a potential for the yen to strengthen in the short term. I think we could see a move towards 97.00 (JPY) in the short term but I don't think we will reach the recent lows again," he said.

He pointed out that there is still risk of further weakness for the Japanese economy, which will continue to weigh down the currency and raise questions as to whether it is a safe haven currency like the U.S. dollar.

Markets will receive the final print for Japanese industrial production for February on Wednesday morning (Tuesday night EDT), which showed an annualized decline of 38.4% previously.

Bennenbroek said the cross will be dominated by equity moves. He said that if equities remain weak, there is a risk that USD/JPY will move lower.

Euro/USD down 0.85 cents to 1.3284

USD/CAD down 0.79 cents to 1.2120

USD/Yen down 1.27 points to 98.83

GBP/USD up 0.82 cents to 1.4937

AUD/USD down 0.61 cents to 0.7258

Euro/Yen down 2.54 points to 131.30

Euro/GBP down 1.08 pence to 0.8893

GBP/CAD down 0.18 cents to 1.8102

CAD/Yen down 0.52 points to 81.55

Euro/CAD down 2.10 cents to 1.6101

The U.S. Dollar Index is up 0.01 points to 84.64

All data taken at 3:28 p.m. EDT.

By Neils Christensen, neilsc@economicnews.ca, edited by Sarah Sussman, ssussman@economicnews.ca