FOREX-Euro up after U.S. data; yen near 15-yr high vs dlr

Trade the News

Thursday September 09, 2010 04:29:14 AM GMT

(Refiles to fix second bullet point to "15-year high vs dollar")

* Euro gains after U.S. data prompts risk tolerance

* The yen remains near 15-year high vs dollar

* Euro in sight of 9-yr low against the yen

* Aussie hits 4-month high on solid jobs data

(Recasts, adds quote, updates prices)

By Nick Olivari

NEW YORK, Sept 9 (Reuters) - The euro rose against the dollar and the yen on Thursday after U.S. data on jobless claims and trade eased concerns about the pace of the U.S recovery, increasing appetite for risk.

The dollar pared losses against the yen after reports showed U.S. initial claims for jobless benefits fell to their lowest level in two months and the U.S. trade deficit narrowed more than expected in July. [ID:nN09174403].

But the yen remained near a 15-year high against the dollar as conflicting messages from Japanese policymakers made investors bet authorities there were not ready to intervene.

"A sharp improvement in the U.S. trade deficit and decline in jobless claims helped to lift risk appetite across the forex market," said Kathy Lien, director of currency research at GFT in New York. "However the dollar failed to receive a lift from the numbers which suggests that some investors are skeptical that the improvements will be temporary."

Midway through the New York session, the euro was up 0.2 percent against the dollar at $1.2750 <EUR=>, near the session peak of 1.2767. The session low was $1.2665.

The euro was also bolstered after ECB Governing Council member Yves Mersch said the euro zone was on the brink of a sustainable recovery and the ECB was likely to discuss removing some support measures at its December meeting. [ID:nFLA9KE693]

The gains were capped by continued concerns about the fragile euro zone banking system. On Wednesday, European Central Bank Executive Board member Juergen Stark was quoted as telling German lawmakers that German banks were undercapitalized. [ID:nBAT005656]

"Confidence is evaporating in the euro zone banking system, particularly for Portugal, Ireland and Greece, and supporting the system will require government debt to rise to unsustainable levels. That is what the market is concerned about," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ in London.

JAPAN INTERVENTION

Price action in higher risk currencies didn't mask investor focus on the yen and the potential by Japanese authorities to intervene in foreign exchange markets to weaken it.

Japanese Finance Minister Yoshihiko Noda said on Thursday the ministry was conducting simulations on forex intervention, but the yen hardly budged as the market still thinks Japan is unlikely to intervene until the dollar falls near 80 yen.

Noda's comments were also undermined after Bank of Japan Governor Masaaki Shirakawa said he did not discuss currencies and monetary policy at a government meeting. [ID:nTKV006408]

The dollar was down 0.2 percent to 83.70 yen <JPY=>, within sight of the 15-year low of 83.34 yen hit on trading platform EBS <JPY=EBS> on Wednesday. The low using Reuters data was 83.32 yen.

Options traders said there was good demand for yen calls in the 1- to 2-month bracket, but yen puts were more popular in shorter dates, suggesting investors are hedging their bets about possible intervention.

The euro is near a nine-year low against the yen hit in late August. The low on Reuters data was 105.41 yen <EURJPY=> and on EBS 105.44 <EURJPY=EBS>. It was last little changed at 106.71 yen <EURJPY=>.

The Australian dollar extended gains as a barrier was taken out at $0.9250, hitting a four-month high on strong jobs data and rising speculation of a rate rise. The Australian dollar was last up 0.9 percent at 0.9266 <AUD=> (Additional reporting by Steve C Johnson in New York and Neal Armstrong in London)

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