Yen, euro fall as risk appetite recovers a touch

[September 08, 2015]  By Jemima Kelly

LONDON (Reuters) - The euro and yen fell across the board on Tuesday as stronger-than-expected German data and rising European stock prices prompted investors to wind back some of the risk aversion that has recently dominated currency markets.

German exports and imports hit record highs in value terms in July, suggesting foreign appetite for goods from Europe's largest economy remained robust despite a slowdown in China, while domestic demand was also holding up well.

Though positive data from Europe's biggest economy would traditionally boost the euro, the currency has in the past jittery months benefited by acting as something of a safe haven, as investors unwound euro-funded positions in riskier but higher-yielding currencies and bought back the single currency.

With European stocks up over 2 percent on Tuesday despite earlier data from China that showed its exports falling for a 10th successive month, the euro fell victim to a renewed appetite for risk that also hurt Japan's yen.

The single currency was down 0.1 percent at $1.11555 while the yen shed 0.6 percent against the dollar to trade at 120 yen.

"The market is trading more risk-on across the board ... and higher-beta G10 currencies are performing a little bit better," said BNP Paribas FX strategist Sam Lynton-Brown in London, referring to currencies that traditionally perform well at times of higher risk appetite.

The Australian dollar was the biggest gainer, rising 0.9 percent to $0.6980 against its U.S. counterpart and 1.5 percent against the yen to 83.70 yen.

But that still left the Aussie within a cent of the 6-1/2-year low it hit against the greenback the previous day. Though risk appetite was moderately higher, it comes after a long period of nerves and caution across markets.

"We've sold off a lot from where we were and this is more of a stabilization that a fundamental change," said BNP Paribas' Lynton-Brown. "In the context of what we've been seeing recently this morning's moves aren't particularly outsized."

Investors are also focused on next week's U.S. Federal Reserve policy meeting. Many had expected that the Fed would announce the first rise in interest rates in almost a decade at this month's meeting but those expectations have faded as worries over the health of the global economy have grown.

"Market sentiment remains extremely fragile, predominantly because of concerns about a China slowdown and emerging markets, and then next week we've got the Fed," said Rabobank senior currency strategist Jane Foley in London.

"So the market is trying to come to terms with that and work out whether or not its positions are in the right place."

(Editing by Andrew Heavens/Ruth Pitchford)

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