* Dollar gains 1 pct on yen as yen tumbles across board
* Moody's affirms U.S. credit rating, supporting dollar
* Talk of yen selling related to Japan investment trusts
* Kiwi climbs as NZ budget soothes credit rating worries
By Masayuki Kitano
TOKYO, May 28 (Reuters) - The yen tumbled across the board on
Thursday, hurt by talk of Japanese retail demand for overseas
assets, while the dollar rose 1 percent against the Japanese
currency, aided in part by Moody's affirming its top credit
rating for the United States.
The dollar jumped to its highest in more than a week against
the yen and edged up against a basket of currencies, building on
gains made on Wednesday after the second of three large U.S.
Treasury auctions this week drew solid investor demand.
The greenback fell steeply last week, hitting its lowest in
five months against the euro, on concerns about the
sustainability of the U.S. government's top credit rating after
Standard & Poor's gave a negative outlook to Britain's AAA rank.
Moody's Investors Services affirmed its top rating for the
world's largest economy on Wednesday, but warned that if the U.S.
failed to reduce debt levels once the economy returned to growth
then its top grade could come under pressure. []
"Sovereign risk concern is fading," said Masafumi Yamamoto,
head of FX strategy at Royal Bank of Scotland in Tokyo.
"But between the dollar and yen there is no strong contrast
and this is purely a technical movement within the range as the
market failed to break the lower boundary of the range."
The dollar rose 1.4 percent to 96.65 yen <JPY=>, pulling away
from a two-month low of 93.85 yen hit last week which is roughly
the base of a trading range stretching to 100 yen that has been
in place since February.
The greenback touched its highest in a week at $1.3793 <EUR=>
per euro, after climbing about a cent on Wednesday helped by a
European Central Bank official comment that euro zone rates could
go lower. But it had retreated to $1.3830 by 0600 GMT.
DOLLAR FORTUNES MIXED, YEN FORTUNES FALLING
The dollar failed to follow through on gains against
commodity-related currencies, with the Australian and New Zealand
dollars both rising on the day and climbing steeply against the
yen. Sterling too rose sharply against the yen.
Analysts and traders in Tokyo said much of the Japanese
currency's fall stemmed from talk about retail investor outflows.
On Wednesday, Japanese retail investors poured $2.4 billion
into new mutual funds investing in global semiconductor firms,
banks and U.S. junk bonds, in the biggest single day of fund
launches this year. []
Such investment trusts that target overseas assets can
generate yen-selling flows, which often hit the market soon after
they are launched.
"There is lots of buying by Japanese players. Since the
investment trusts launched yesterday attracted a lot of money,
there is talk that there could be some yen selling related to
that," said a trader for a major Japanese bank.
The Australian dollar rose 1.5 percent to 75.00 yen
<AUDJPY=R>, the euro rose 1.2 percent to 132.62 yen <EURJPY=R>
and sterling climbed more than 1 percent its highest since early
November at 153.76 yen <GBPJPY=R>.
Growing hopes that the worst of the U.S. and global economic
recessions may be over has helped spur a rally in currencies such
as the Australian and New Zealand dollars in the past few months.
The New Zealand dollar gained 0.6 percent to $0.6189 <NZD=D4>
after S&P said it had affirmed New Zealand's credit rating and
revised the outlook to stable following the country's annual
budget on Thursday. []
The market had been concerned about the risk of a credit
rating downgrade after the budget and the kiwi climbed 2 percent
against the faltering yen to 59.67 yen <NZDJPY=R> once the rating
issue was out of the way.
(Additional reporting by Charlotte Cooper; Editing by Michael
Watson)
