* Yen rises broadly on fears over global economic slowdown
* Japanese retail investors may be repatriating funds
By Satomi Noguchi
TOKYO, Oct 15 (Reuters) - The yen gained broadly on Wednesday
as investors turned risk-averse after shares in Asia fell on
fears that the credit crunch would lead to a sharp slowdown in
the global economy.
Stock markets in South Korea and Hong Kong slid more than 2
percent, dampening sentiment that had been boosted by aggressive
bank rescue measures around the world.
"We are in a phase of recovering confidence about the banking
sector, but the market's focus is shifting to the health of
global economy," said Hideaki Inoue, chief manager of forex
trading at Mitsubishi UFJ Trust Bank.
Some traders said Japanese retail investors may be
repatriating investments overseas after seeing a historical
sell-off in global stock markets last week, strengthening the
yen.
The euro fell against the yen and the dollar on selling from
hedge funds after data from Germany showed a bigger-than-expected
slide in investor sentiment in October, suggesting the euro
zone's top economy may be in for a prolonged slump.
The euro fell around 0.8 percent from late New York trade on
Tuesday to 138.07 yen <EURJPY=R> after dipping as low as 136.95
yen on trading platform EBS.
On Tuesday, the euro rebounded more than 2 percent to near
142 yen, rising sharply from a three-year low of 132.15 yen hit
late last week, on hopes that actions taken by European
governments to recapitalise their banking systems would ease the
credit crisis.
The single currency dropped 0.2 percent against the dollar to
$1.3589 <EUR=>, but the losses were relatively limited as the
economic outlook for the U.S. was also gloomy.
The President of the Federal Reserve Bank of San Francisco,
Janet Yellen, said late on Tuesday that the U.S. economy "appears
to be in a recession". []
The dollar fell around 0.6 percent to 101.60 yen <JPY=>,
retreating further from the previous day's high above 103 yen.
The yen is one of the biggest beneficiaries when investors
demand safety and unwind carry trades, in which the low-yielding
Japanese currency is used to fund investments in higher-yielding
currencies and riskier assets.
Panic over the global banking system sent the yen to a
six-month high of 97.91 yen against the dollar on Friday.
Traders said fears about the financial crisis receded after
short-term interest rates for dollars eased in response to the
U.S. announcement that it would inject $250 billion into banks,
including the country's nine largest lenders.
The action followed similar pledges in Britain, France and
Germany.
But the overall state of the market remained fragile, making
prices very volatile.
"Global investors continue to cut risky investments and
prefer to keep them as cash, and that's helping the yen's broad
gains," said Shuichi Kanehira, a senior trader at Mizuho
Corporate Bank.
The Canadian dollar edged up slightly against the U.S. dollar
after Canadian Prime Minister Stephen Harper won a strengthened
second minority government mandate on Tuesday, according to
provisional results. []
The U.S. dollar briefly fell as low as C$1.1595 <CAD=D4>, off
a high of C$1.1688 hit earlier in the day, and down from a
three-year peak of C$1.2135 struck on Friday.
"A minority win by the Conservatives was entirely expected,
but there had been some uncertainty as to the extent of that
minority victory," said Sue Trinh, senior currency strategist at
RBC Capital Markets in Sydney.
(Additional reporting by Eric Burroughs and Masayuki Kitano)
