* Yen falls broadly, risk demand improves on higher stocks
* Dollar rises above 101 yen, highest since Oct 2008
* Dollar pressured vs euro, sterling
(Adds quotes, updates prices)
By Naomi Tajitsu
LONDON, April 6 (Reuters) - The yen fell broadly on Monday,
hitting its weakest against the dollar and the euro in nearly
six months as investors took on perceived riskier assets on the
view that a global economic downturn may have hit a bottom.
The dollar rose as high as 101.45 yen, according to Reuters
data, vaulting above 101 yen for the first time since last
October, while the euro climbed as high as 137.43 yen, a level
last seen roughly half a year ago.
Analysts said that a 1.2 percent rise in European shares
<> was the catalyst of weakness in the yen, which extended
losses made in Asian trade.
"As long as stocks can retain their buoyancy ... risk
appetite and risk-based trades will be in vogue and investors
will continue to add to and rebuild yen short positions," said
Jeremy Stretch, currency strategist at Rabobank in London.
Still, he added that market participants were cautious about
whether the rebound in risk appetite would last, due to the
ongoing uncertainty about whether weakness in the global economy
has peaked.
By 1027 GMT, the dollar was up 1 percent at 101.25 yen
<JPY=>.
A move above 101.00 yen was technically significant as it
was a 38.2 percent Fibonacci retracement of its decline from a
peak in 2007 to its 13-year low in January.
The euro <EURJPY=R> trimmed some of its earlier gains
against the yen, but still traded 1.1 percent higher at 136.70
yen.
The dollar extended its gains against the Japanese currency
after data on Friday showed U.S. firms shed another 663,000 jobs
in March, while the unemployment rate soared to 8.5 percent.
While the data was grim, U.S. stocks ended higher, and prior
data was revised to show job losses of 741,000 in January, which
some saw as possibly the bottom of the job loss cycle.
"Markets are taking heart that the pace of economic
contraction is fading," said Lee Hardman, currency economist at
Bank of Tokyo-Mitsubishi UFJ in London. "That is helping risk
assets and prompting the unwinding of safe assets, namely the
yen and dollar."
The dollar lost ground against other major currencies as
risk appetite improved. Both the U.S. and Japanese currencies
have rallied in past months due to shrinking demand for risk as
global economic conditions worsened.
The euro <EUR=> traded 0.2 percent higher at $1.3515, after
rallying to around $1.3580 in earlier trade.
The common currency pared some gains after European Central
Bank Executive Board member Lorenzo Bini Smaghi said currency
markets were prone to overshooting or undershooting, and as a
result, intervention by authorities may sometimes be
appropriate. []
Meanwhile, data showed euro zone producer prices fell 1.8
percent in February from the same period a year ago, while
retail sales dropped 0.6 percent in February from the previous
month. Both were slightly weaker than market forecasts.
But separate figures indicated better sentiment among euro
zone investors, with the Sentix index improving to -35.3 in
April from -42.7 the previous month, and beating forecasts for
-40.7.
The euro was earlier supported by a confidential report
quoted by the Financial Times that said struggling European
Union countries in central and eastern Europe should switch to
the euro even without full euro zone membership.
This boosted the single European currency on the view that
while the idea is still in its infancy, such a move would
ultimately be beneficial to the entire European region.
Sterling <GBP=D4> rose to a two-month high of $1.4952 before
retreating to $1.4900, 0.5 percent higher on the day. Gains in
the UK currency were driven by a rally the yen to 151.52 yen
<GBPJPY=R>, its highest since last November.
Traders said a recovery in emerging market assets, buoyed by
G20 steps to help developing economies last week, added to
investors' appetite for riskier and higher-yielding currencies
such as the Australian and New Zealand dollars.
The New Zealand dollar jumped more than 2 percent at one
stage to a five-month high above 60 yen <NZDJPY=R>. The
Australian dollar gained 1.3 percent to a six-month high of
72.87 yen <AUDJPY=R>, according to Reuters data.
"We are perhaps looking at the glass being half full than
three-quarters empty as we were in the past few months," said
Stretch at Rabobank.
"If we see slight improvements in economic data, it could
play into the short-term recovery story and we can continue with
the perception of a bear-market rally."
(Additional reporting by Tamawa Desai, editing by Victoria
Main)
