* Yen extends broad gains as regional shares fall
* Investors more cautious of return to risky assets
* China exports dip more than expected, impact limited
By Satomi Noguchi
TOKYO, May 12 (Reuters) - The yen rose broadly on Tuesday to
extend gains made the previous day as regional stocks fell after
a slide on Wall Street, prompting investors to further reduce
investments in risky assets.
The dollar edged down against a basket of currencies towards
Monday's four-month low but held firm versus the euro, with
investors taking profits from gains in other riskier currencies
that had been lifted by optimism about the U.S. banking system.
The yen drew some support after news that China's exports in
April fell more than expected, denting expectations that the
worst of the contraction in trade flows triggered by the global
financial crisis is moderating. [] []
But the impact was offset by other data indicating the pace
of Chinese fixed-asset investment growth in urban areas has
gathered momentum, suggesting Beijing is succeeding in cushioning
the effect on the economy of contracting exports. []
[]
"The market returned to being a little more cautious about
reading economic fundamentals after optimism reigned in the past
few months," said Hideaki Inoue, chief manager of forex trading
at Mitsubishi UFJ Trust Bank.
"The key this week will be to see how much more profit-taking
will come, with eyes on economies in emerging markets which give
basic support to market hopes," Inoue said.
Traders said investors may continue to lighten positions and
buy back dollars and yen they used to fund investments in
higher-yielding currencies such as the Australian dollar.
"I think the market has come to a turning point in terms of
both technical moves and fundamentals. Stocks and cross/yen have
risen helped by a view that the economic deterioration is
slowing," said Jun Kato, deputy general manager at Shinkin
Central Bank.
"But fundamentals per se are still weak, so the market is
expected to show more vulnerability to the weak side of the
economy as it has excessively priced in the positive side of it,"
he said.
But hopes that the worst of the economic slump and financial
crisis are over also remained strong, and that in turn provided
some support to the euro and the Aussie, traders said.
"We've seen a bit of retracement in stocks as well as risk.
The yen crosses have come off and the dollar is a bit stronger
but not much," said a trader at a European bank in Hong Kong.
"It's a little dependent on stocks and it's hard to see where
the fresh buying in the stock market comes from after a very
decent rally so far," the trader said.
The dollar fell 0.2 percent from late New York trade to 97.29
yen <JPY=> after dropping as low as 97.13 yen earlier on trading
platform EBS, sliding back in the middle of a range for the past
few months of 95-101 yen.
The euro was nearly flat at 132.37 yen <EURJPY=R>, erasing
earlier losses to 131.77 yen on EBS.
The dollar index, a gauge for the greenback's performance
against six major currencies, slipped 0.2 percent to 82.681
<.DXY>, trimming Monday's rebound from a four-month low of 82.292
touched earlier that day.
The euro edged up 0.2 percent to $1.3605 <EUR=>, after
sliding the previous day as low as $1.3557 on EBS from a
seven-week peak of $1.3670 hit earlier on Monday.
Tokyo's Nikkei share average <> slipped 1.4 percent by
late trade after booking a six-month closing high the previous
day, while Chinese stocks dipped 0.1 percent <>. []
After Chinese trade data, investors were looking to its
retail sales and industrial production data for April due out on
Wednesday to see if they provide some direction to the market,
traders said. []
(Additional reporting by Charlotte Cooper and Kaori Kaneko;
Editing by Michael Watson)
