LONDON: The yen fell against the dollar on Monday with market focus firmly on Japan's currency following its surge last week in response to the Asian country's natural disaster and nuclear crisis. In late London trade, the dollar rose to 81.00 yen from 80.59 yen late in New York on Friday. The European single currency continued its upwards progress against the greenback, changing hands at $1.4201 from $1.4176 on Friday. Earlier in the day the euro reached $1.4217, a level not seen since early November. Tokyo exchanges had been shut for a public holiday.
"Appetite for risk this week will be once more tempered by unfolding events in Libya, the oil prices reaction to these events, as well as events in Japan, and the condition of the nuclear reactors at Fukushima," said Michael Hewson of CMC Markets: World Bank chief regional economist Vikram Nehru said the yen, which last week hit post-war highs against the dollar, was set to normalise after Japan and its G7 partners jointly intervened to steady foreign exchange markets.
"The expectation is that this strengthening of the yen was relatively temporary," Nehru told reporters in Singapore.
"We suspect that with the injection of liquidity now by the Japanese authorities, together with a slowdown in net inflow, the yen will once again go back to its normal levels overtime." The yen soared briefly to a post-World War II high of 76.52 yen to the dollar last week. Analysts said the yen was rising as Japan would need to repatriate funds from abroad to help pay for reconstruction. Capital Economics said Friday's statement by the G7 that they would step into currency markets meant the yen "will be significantly weaker in a few months' time". But the intervention is unlikely to be sufficient enough to help Japan rebuild its economy, which has been hammered by the March 11 earthquake and tsunami, the London-based research house said.
"What's more, the fact that the action is coordinated is more psychological than real," it added. The yen soared after the massive earthquake and tsunami slammed into Japan's north eastern region with the currency hitting its post-war peak on Thursday. Tokyo is also battling to avert a meltdown at a nuclear plant that was crippled by the natural disaster, Japan's worst in nearly a century. In London trading on Monday, the euro changed hands at 115.04 yen, against 114.27 late Friday, £0.8719 (0.8725) and 1.2867 Swiss francs (1.2781). The dollar stood at 81.00 yen (80.59) and 0.9060 Swiss francs (0.9006). The pound was at $1.6288 (1.6235). On the London Bullion Market, the price of gold increased to $1,426.50 an ounce from $1,420 late Friday.
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