* Euro gains on yen, takes other yen pairs with it
* Yen fall aided by speculation over investment trust flows
* Bias toward risk-taking on upbeat stocks, earnings -trader
* Kiwi near 9-month high vs dollar
By Kaori Kaneko
TOKYO, July 23 (Reuters) - The yen dropped sharply across the
board on Thursday, undercut by expectations of investment trust
flows out of Japan this week and as gains in the euro set off
automatic sell orders in other yen pairs.
The Australian and New Zealand dollars touched their highest
in three weeks against the Japanese currency, climbing about 1
percent on the day, while the dollar also gained 0.7 percent.
One trader said the yen's move down began with euro buying
early in the Asian session, which then triggered stop-loss buy
orders on the single European currency and the dollar.
The market is also watching closely for yen selling related
to launches this week of Japanese investment trusts which will
invest in overseas assets and foreign currencies.
"Speculation of solid demand for investment trusts prompted
investors to sell the yen," said a trader at a European bank.
"Also, investors unwound dollar short positions accumulated
against the yen," he said.
UBS is set to launch 10 investment trusts or "toshin" on
Friday with subscription ceilings totalling 1.2 trillion yen
($12.8 billion) that will invest in global bonds.
Such investment funds do not always gather as much funds as
the ceiling allows, and sometimes fall well short, but the market
watches them carefully for clues on the yen's direction.
UBS will give investors a choice of currencies, including the
yen, the Australian dollar, the Brazilian real, the South African
rand and the Turkish lira.
Nomura Asset Management also launches an investment trust on
Friday with a subscription ceiling of 100 billion yen which will
focus on emerging market stocks.
The dollar rose 0.7 percent to 94.35 yen <JPY=> and the euro
climbed 1 percent to 134.43 yen <EURJPY=R>, with the day's peak
at 134.53 on trading platform EBS. One trader said buy orders at
133.60 yen had helped propel it higher early on.
The European currency edged up 0.2 percent to $1.4248 <EUR=>,
below a seven-week high of $1.4278 hit on Tuesday.
The dollar index <.DXY>, a gauge of the greenback's
performance against six major currencies, was holding above this
week's seven-week low of 78.563.
"The overall bias is toward risk-seeking, as the stock
markets have shown a strong run-up and the Fed has clearly stated
it will continue its easy policy, which was a relief for the
market," said Tsutomu Soma, a senior manager of foreign
securities at Okasan Securities.
Traders said Federal Reserve Chairman Ben Bernanke provided
little market-moving news on Wednesday in testimony to the Senate
Banking Committee. Bernanke reiterated that the U.S. economic
outlook was improving but supportive policies would be necessary
for a while to prevent rising joblessness from sapping economic
recovery. []
Risk appetite has been improving in recent days, fuelled by
strong quarterly results from some large banks including Goldman
Sachs <GS.N>, although it can be fickle with gains reversing the
next day.
"Optimism has emerged on recent relatively solid corporate
earnings from the U.S. But since the currency market has priced
that in, it is looking for stronger leads," said Yousuke
Hosokawa, Treasury Department senior manager at Chuo Mitsui Trust
and Banking.
Among commodity-related currencies, the New Zealand dollar
rose 0.3 percent to $0.6607 <NZD=D4>, after hitting its highest
point in nine months above $0.6630 the previous day.
The Australian dollar firmed 0.5 percent to $0.8195 <AUD=D4>
although it was still below Wednesday's six-week high of $0.8214.
(Additional reporting by Aiko Hayashi; Editing by Joseph
Radford)
