Yen defensive in Asia

The yen stayed on the defensive on Monday, but losses were limited, in a sign that further action may be needed to curb the Japanese currency after the first G7 joint intervention in over a decade. Analysts said the G7 deal was more likely an attempt to dampen market volatility than reverse the yen's strengthening trend. Japan markets are off on Monday, sapping liquidity even further.
The dollar rose 0.4 percent from late US trade on Friday to 80.93 yen. At one point on Friday, the dollar had surged nearly 4 percent on the day to 82.00 yen. The G7's joint intervention on Friday came after the yen jumped to a post-World War Two record high of 76.25 yen to the dollar last Thursday. Stop-loss dollar selling linked to option barriers and long liquidation by Japanese retail margin traders had helped to fuel the US currency's fall against the yen.
There has also been much market speculation that Japanese insurers may repatriate funds from abroad to procure cash to pay policyholders in the wake of the devastating earthquake and tsunami that struck Japan on March 11. The intervention has succeeded in bringing down the implied volatility on dollar/yen as investors saw less need to hedge against a further yen rise for now.
The implied volatility on one-month dollar/yen traded at around 13 percent, well off the highs of about 21 percent on Thursday. The yen dipped broadly and the Australian dollar rose 0.8 percent to 81.07 yen, with risk sentiment improving due to signs of some progress in tackling the crisis at Japan's quake-stricken Fukushima nuclear power plant.
On the charts, it would take a break above the upper end of the tentative declining channel around 83.05 to lower the risk of a dip back to 76.25, or even to the lower channel line around 75.00, SG analysts said. One factor supporting the Japanese currency is the fact that no one seems to favour the dollar at the moment. The dollar fell to a 15-month low against a basket of major currencies of 75.536 earlier on Monday.
The euro briefly hit a four-month high of $1.4200 as the eurozone looked set to officially agree on details of bolstering a bailout fund at the March 24-25 EU summit, aimed at soothing market fears about the region's sovereign debt problems. After trimming its gains, the euro stood at $1.4168, down 0.1 percent on the day.