Yen falls as risk appetite rebounds before central bank meetings

Wednesday,   11-Sep-2019   01:57 PM (IST)

The Japanese yen fell on Wednesday as the rush into safe-haven assets during the summer continued to unwind on the back of rising risk appetite, while the euro paused before Thursday’s European Central Bank meeting. The yen had rocketed toward a 2019 high as investors in August fretted about the prospect of a global recession and selloff. Forex traders often buy the yen in times of uncertainty because of Japan’s vast current account surplus and because they believe Japanese investors will bring their money home when international markets tumble. But with broader stock markets recovering on hopes of easing U.S.-China tensions and diminishing risks of a no-deal Brexit before several key central bank meetings, the yen is now weakening. The yen was last down 0.2% at 107.73 yen, some way from the 105 levels of late August. Broader risk appetite fed through into gains for both the Australian and New Zealand dollars, which were up 0.1% each. The Chinese yuan briefly jumped after the editor of Communist Party newspaper The Global Times tweeted that China would introduce measures to mitigate the impact of the trade war. The offshore yuan later shed those gains and was last down 0.1% at 7.1136 yuan per dollar. Elsewhere, investor focus for now is centered on the ECB meeting on Thursday. Expectations that policymakers will push interest rates even further into negative territory have weighed on the euro, which has shed 3% since June. The single currency was little changed at $1.1044, with bets divided on the likely scope and style of any stimulus. The dollar index ticked 0.1% higher at 98.414. The ECB decision is likely to set the tone for upcoming rate-setting decisions by the U.S. Federal Reserve and the Bank of Japan next week, and for the broader global risk appetite. Sterling edged lower to $1.2349, but was near its six-week high of $1.2385 hit earlier in the week.