Dollar and yen gain as riskier assets succumb

The dollar and the yen gained broadly while perceived higher risk currencies came under heavy selling pressure yesterday as riskier assets succumbed to profit-taking after a recent strong rally.

A reassessment was sparked after US data showed a slide in consumer sentiment during July, encouraging investors to take profits from the sharp risk rally that caused currencies such as the Australian dollar to surge, along with the euro.

Further jitters were sparked by sharp falls in Chinese stocks, which fell more than five per cent at one point, partly due to concerns that Chinese banks may begin to restrict lending. The Japanese currency also advanced amid speculation domestic investors were repatriating earnings. The yen rose against all 16 most-traded currencies. Demand for the yen also rose amid speculation Japanese investors will bring back funds from redemption payments on €18 billion euros (Dh93.5bn) in European government bonds maturing yesterday.

The yen strengthened to 133.67 per euro in London. It was at 94.33 per dollar, extending its advance this month to 1.8 per cent.

The Japanese currency extended its advance against the 16-nation currency after a car bomb explosion in the Spanish city of Burgos. The euro bought $1.4171. The 16-nation currency traded in July in a range of $1.3833 to $1.4304, the strongest level since June 3.

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