Yen Trades Near 2009 Low Against Euro as BOJ Raises Debt Buying

March 18 (Bloomberg) -- The Yen traded near the weakest level against the Euro this year after the Bank of Japan said it will step up purchases of government debt, encouraging investors to seek higher-yielding assets overseas.

The dollar was near a one-month low against the euro as Asian stocks extended a rally in global equities, damping demand for the U.S. currency as a refuge from the financial turmoil. South Korea’s won had the biggest decline against the dollar of the 16 most-traded currencies on speculation domestic companies took advantage of its recent gains to pay import bills.

“Governments and central banks are taking various measures which are supporting sentiment that the worst of the financial crisis may be over,” said Yuji Saito, Tokyo-based head of the foreign-exchange group at Societe Generale SA, France’s third- largest bank. “People who had shunned risk are returning to the markets. This is causing selling of the dollar and the yen.”

Japan’s currency traded at 128.17 against the euro as of 7:49 a.m. in London, from 128.35 yesterday in New York, when it slid 0.8 percent. It earlier dropped to 128.83, the weakest since Dec. 29. The yen was at 98.58 per dollar from 98.60.

The dollar was at $1.3001 per euro from $1.3017 yesterday, when it declined 0.4 percent. The U.S. currency touched $1.3072 on March 16, the lowest level since Feb. 10.

Market Commentary

MARKET COMMENTARY ON 18TH MARCH 2009

GBP/USD posted an inside day with a lower close on Tuesday but remains above the 10-day moving average crossing at 1.3970. The mid-range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI are bullish hinting that a short-term low might be in or is near. Closes above the 20-day moving average crossing at 1.4140 are needed to confirm that a bottom has been posted. If June renews last week's decline, January's low crossing at 1.3630 is the next downside target.

EUR/USD closed higher on Monday as it extends this month's rally. The high-range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near- term. If June extends this month's rally, the 38% retracement level of the December-March decline crossing at 1.3260 is the next upside target. Closes below the 20-day moving average crossing at 1.2750 would temper the near-term friendly outlook in the market.

USD/CHF closed higher on Tuesday due to short covering as it consolidated some of last Thursday's decline. The high-range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near-term. Closes above the 20-day moving average crossing would temper the near-term friendly outlook in the market. Closes above the reaction high crossing are needed to renew the rally off February's low.

USD/CAD closed lower on Tuesday due to profit taking but remains above the 20-day moving average crossing. The high-range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term. Multiple closes above the 20-day moving average crossing are needed to confirm that a short-term low has been posted. If June renews this year's decline, weekly support crossing is the next downside target.

USD/JPY closed lower on Tuesday but remains above the 62% retracement level of the August-January rally crossing. The mid-range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI are bullish hinting that a short-term low might be in or is near. Closes above the reaction high crossing are needed to confirm that a short-term low has been posted. If June renews this year's decline, the 75% retracement level of the August-January rally crossing is the next downside target.