Yen rises in Asia

The yen edged higher in Asia on Tuesday as more market players cut back on carry trades, but the move will likely be short-lived as hedge funds and Japanese life insurers positioned for the yen to resume its slide before long. Risky assets were hit by a double-whammy on Monday after fears mounted that Greece will have to restructure its mountain of debt, possibly as early as this summer, and Standard & Poor's threatened to cut the United States' prized AAA credit rating.
The drop in Wall Street shares spilled across Asia, with Japan's Nikkei average and Hong Kong's Hang Seng both shedding about 1 percent as investors booked profits and closed positions heading into the Easter holidays later this week. Traders and analysts said the S&P threat would likely have little lasting impact, and even the euro's slide on worries about Greece seemed more driven by profit-taking after the euro's rise ran out of steam above $1.45 last week.
"It's kind of a healthy correction. The market had bought too much in a kind of euro euphoria," said Masafumi Yamamoto, chief FX strategist at Barclays Capital in Tokyo. The euro was down slightly at 117.35 yen. The single currency fell as low as 116.49 yen on EBS, the lowest since March 30, on Monday before staging a late-day recovery along with US stocks. The single currency was also little changed at $1.4220 after having skidded to a low of $1.4156 on Monday, breaking the upward trendline of its January-April surge and leaving it exposed to a deeper pull-back.
The dollar dipped to 82.42 yen, having fallen to a near three-week low of 82.19. Macro hedge funds were looking to go long the dollar around these levels, both buying spot and picking up dollar/yen call options, traders said. Against the dollar, the euro was at $1.4230 after sliding to a two-week low at $1.4156 on EBS. The euro's next layer of support stems from a cluster of daily highs and lows bunched at $1.4035/55. Further down, the 38.2 percent retracement of the euro's January-April surge is at $1.3887.
The dollar index, which tracks the US currency's performance against a basket of major currencies, was little changed at 75.516 after touching a two-week high of 75.810, well off a 16-month low of 74.716 set last week. The Australian dollar was down 0.3 percent at $1.0470 after having shed about a cent on Monday to a low of $1.0454. But the Aussie was not far off a 29-year high of $1.0585 set earlier this month, outperforming other currencies. The New Zealand dollar also took a hit from the drop in higher-yielding currencies after reaching a three-year peak the previous day.