* Corporate flows help yen recoup some losses
* Euro succumbs to profit-taking, Asian sovereign names cited
* Dollar has fiscal troubles of its own
* Market looking ahead to Q4 U.S. GDP figures
* Aussie hurt by fall in commodities
By Hideyuki Sano
TOKYO, Jan 28 (Reuters) - The yen recouped some of the losses
it made after Standard & Poor's cut Japan's credit rating by a
notch, while the euro slipped from two-month highs on Friday as
players took profits from its recent rally.
The euro's hefty gains from a four-month low hit less than
three weeks ago suggested it was ripe for profit-taking, but a
mounting number of warnings on inflation by euro zone
policy-makers is seen supporting the currency for now.
The dollar slipped to 82.70 yen <JPY=> from around 82.90 yen
in late U.S. trade, after initially rallying to as high as 83.22
yen on Thursday.
"Although Japan has a huge fiscal problem, its debt is mostly
financed domestically and the Japanese bond market is stable
after the downgrade. So I don't think the downgrade will lead to
continued selling in the yen," said Etsuko Yamashita, chief
economist at Sumitomo Mitsui Banking Corp.
"But the yen might become more prone to selling in future,
for instance if the government was unable to pass its budget for
next fiscal year in time (by the end of March," she added.
In the currency market, the dollar/yen pair was overwhelmed
by selling by Japanese exporters as well as speculative accounts
that were quickly taking profits from the greenback's jump.
The dollar's quick retreat only cemented expectations among
traders that its narrow 82.00-83.50 yen trading band will hold
for now.
The yen also bounced against the euro, which ran into
profit-taking after it hit a two-month peak of 114.02 yen on
Thursday <EURJPY=R>, which marked a gain of 6.7 percent from a
three-month low of 108.63 yen set on Jan. 10.
The euro last traded at 113.35 yen, down 0.5 percent on the
day.
Against the dollar, the single currency fell 0.2 percent,
with market participants including an Asian sovereign player said
to be taking profits in the pair following its 7.0 percent rise
from a four-month trough marked earlier this month.
The euro <EUR=> slipped to around $1.3710 from around $1.3730
in late U.S. trade.
It went as high as $1.3760 on Thursday after European Central
Bank policy-maker Lorenzo Bini Smaghi warned of a rising tide of
imported inflation. []
That was just the latest hawkish comment by ECB policy-makers
to have given the market the clear impression that the bank is
likely to tighten well ahead of the Federal Reserve.
The next chart barriers for the euro are the Nov. 22 high of
$1.3786 and the peak from Nov. 10 of $1.3826.
Breaks here could even unleash a further retracement to
$1.4283 -- a high hit right after the Fed announced a massive
asset purchase programme.
"In the race towards a rate hike, the European Central Bank
is going well ahead of the Fed. That points to a gradual decline
in the dollar," said Katsunori Kitakura, chief dealer at Chuo
Mitsui Trust and Banking.
While market players are aware that the problem of debt
financing in some euro zone countries could linger, the euro zone
no longer looks isolated in its suffering given the fiscal
troubles in Japan and the United States.
Late Thursday, Moody's reminded investors that it might turn
negative on its U.S. rating outlook in the next two years, given
how the country's budget deficit has continued to swell.
"Once this knee-jerk reaction (to Japan's downgrade) fades,
the USD could be dragged down by its own fiscal concerns," said
analysts at CitiFX in a note to clients.
Such perceptions may be behind the dollar's weakness, some
market players said, as the the greenback stood near an 11-week
low against a basket of major currencies.
The index <.DXY> <=USD> stood at 77.786, having fallen to
77.594 on Thursday, a level last seen in November.
The immediate focus will be on U.S. data, including gross
domestic product (GDP) due at 1330 GMT, which is forecast to have
grown an annualised 3.5 percent last quarter, up from 2.6 percent
the previous quarter.
A strong number could help the dollar against the euro.
It might also benefit risk trades in commodities and
equities and growth-leveraged currencies such as the Australian
and Canadian dollars, though recent falls in commodity prices
have been sapping momentum for these currencies.
The Aussie dollar slipped 0.1 percent to $0.9910 <AUD=D4>,
clinging above its 90-day moving average at around $0.9894.
"It looks like the current adjustment in precious metals is
becoming a major correction. I suspect the Aussie will be under
pressure for some time," said a European bank trader.
Gold <XAU=> hit a four-month low on Thursday. Some emerging
countries have seen sharp falls in share prices this month, to
the detriment of growth-linked currencies such as the Aussie.
(Additional Reporting by Wayne Cole in Sydney; Editing by
Michael Watson)
