Yen hits six-month high against subdued dollar, Fed in focus


By Ritvik Carvalho

LONDON, Sept 21 (Reuters) - The yen hit a six-month high against the dollar on Monday, gaining for a sixth consecutive session against the greenback as stock markets tumbled and pushed investors to the perceived safety of the Japanese currency.

Wall Street closed lower on Friday, and both Asian and European stock markets fell on Monday as the threat of new lockdowns amid rising cases of the COVID-19 disease made investors anxious about the global recovery.

In early deals in London, the yen hit 104.065 against the dollar, gaining as much as half a percent. That was its highest level since March 12. JPY=

Marshall Gittler, head of research at BDSwiss, said the yen's rise was part of a typical "risk-off" move in FX markets with the exception of the Swiss franc, which turned weaker.

"With the pickup in foreign bond yields for Japanese investors getting less and less, capital flows out of Japan may fall even further," he said.

"Meanwhile, with Warren Buffet buying Japanese stocks and a new administration coming in with a focus on economic and regulatory reform, foreign purchases of Japanese stocks may pick up."

The result could be a stronger yen regardless of risk sentiment, Gittler said.

In its past six sessions, the yen has gained 2% against the dollar.

The greenback in the meanwhile traded flat against a basket of peer currencies. =USD

Key for the dollar's direction this week will be a slew of Federal Reserve speakers, who may shed light on the U.S. central bank's new approach to inflation.

Fed Chairman Jerome Powell is due to appear before Congressional committees later this week while Fed committee members Lael Brainard, Charles Evans, Raphael Bostic, James Bullard, Mary Daly and John Williams also make public speeches.

The euro traded 0.05% lower to the dollar at $1.1833. EUR=EBS, while sterling also gave up 0.1% to trade at $1.2903. GBP=

"To see euro/dollar break to the upside, FOMC (Federal Open Markets Committee) members would need to flip communication in a dovish direction and signal more support while PMIs should surprise on the upside," said Christin Tuxen, Head of FX Research at Danske Bank.

Tuxen said the bank's main scenario was a broadly unchanged spot rate in the euro/dollar pair by week end.

In Asia, the Chinese yuan hovered just below a 16-month high. CNY=

Foreigners' Chinese bond buying has helped put the yuan on a tear, lifting it nearly 6.5% in four months.

Investors are expecting FTSE Russell will include China in its World Government Bond Index .SBWGU on Thursday, likely triggering even more inflows and supporting the currency.

The Taiwan dollar TWD=TP jumped 0.7% to a seven-year high of 28.935 per dollar, a move analysts said might be due to a combination of equity inflows and authorities seeking to project calm amid heightened cross-straits tensions.

(Reporting by Ritvik Carvalho; additional reporting by Tom Westbrook in Singapore; Editing by Angus MacSwan)

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


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