Yen rises on China tightening fears

December 7, 2010

, TOKYO, Dec 7 – The yen rose to a three-week high against the dollar in Asia on Tuesday as speculation about a possible Chinese interest rate hike fuelled demand for the safe-haven Japanese currency, dealers said.

China\’s central bank may raise interest rates around the weekend to combat surging prices, the state-run China Securities Journal cited analysts as saying. November\’s consumer price index is due out on Monday.

The dollar fell to as low as 82.30 yen before climbing back to 82.63, compared to 82.67 in New York Monday.

The yen\’s surge was "a little one-sided," commented Japanese Finance Minister Yoshihiko Noda. The dollar sank to a 15-year low of 80.21 yen in early November.

In recent days the yen has risen on renewed fears for the US economy following weak US jobs data and comments from US Federal Reserve chairman Ben Bernanke that further stimulus measures might be a possibility.

The Japanese unit gained more momentum after the report Tuesday that the Chinese central bank may raise interest rates around this weekend, causing short-term investors to trim holdings of risk-sensitive currencies, said Hideaki Inoue, senior dealer at Mitsubishi UFJ Trust and Banking.

While the report in the journal may not reflect official views in Beijing, traders noted that China has a history of announcing tightening measures in off-market hours.

The euro was changing hands at 1.3338 dollars, up from 1.3304 dollars in New York late Monday. It stood at 109.98 yen from 109.96 yen.

The single currency trimmed earlier losses in the belief that the beleaguered Irish government\’s six-billion-euro austerity budget will be passed at a parliamentary vote, enabling a huge bailout, dealers said.

Ravaged by the global financial crisis and a deep recession, Ireland won an 85-billion-euro (113-billion-dollar) rescue deal from the European Union and the International Monetary Fund just over a week ago.

But the euro\’s gains were limited as many investors remained cautious about the issue, analysts said.

"Investors want to wait to see how the (Irish) vote actually turns out" before making major bets on the euro, Yuzo Sakai, manager of foreign exchange business promotion at Tokyo Forex & Ueda Harlow, told Dow Jones Newswires.

The dollar was mixed against other Asian currencies.

It rose to 1.3044 Singapore dollars from 1.3032 Monday and to 1,135.10 South Korean won from 1,132.30.

It slipped to 43.40 Philippine pesos from 43.70, to 30.11 Taiwan dollars from 30.14, to 9.010 Indonesian rupiah from 9,015, and to 29.98 Thai baht from 30.04.

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