* Yen pares gains as US stock futures, Nikkei turn higher
* Investors awaiting results of U.S. bank stress tests
* Some focus on Japan mutual fund launches towards month-end
By Masayuki Kitano
TOKYO, April 23 (Reuters) - The yen gave up early gains and
slipped broadly on Thursday as U.S. stock futures and Tokyo share
prices turned positive, spurring buybacks of higher-yielding
currencies against the yen.
The yen rose broadly earlier in the day as concerns about the
banking sector re-emerged in the wake of disappointing earnings
from Morgan Stanley on Wednesday. []
Investors are concerned about the outlook for banks ahead of
the U.S. government's "stress test" results, and an initial dip
in U.S. S&P futures <SPc1> also helped temper risk appetite and
lent support to the yen.
But the Japanese currency later came under pressure as S&P
futures turned positive and rose 0.8 percent, while Japan's
Nikkei share average shed its earlier losses and climbed 1.4
percent <>.
"The flows that are coming out are probably from hedge funds.
I get the sense that traders are just sticking to short-term
trading," said a trader at a major Japanese trading house.
The yen may also be facing some pressure from yen-selling
flows linked to a slew of Japanese investment trusts expected to
be launched towards the end of the month, he said. Some of these
funds will invest in overseas assets or give investors the option
of taking on foreign exchange risk.
But other market players said the upcoming launches had not
affected currency markets.
The dollar was steady against the yen at 98.05 yen <JPY=>,
after falling to 97.63 yen on trading platform EBS earlier, just
shy of a three-week low of 97.57 yen hit on Wednesday.
The euro rose 0.3 percent to 127.78 yen <EURJPY=R>, having
rebounded from a one-month low of 126.10 yen hit earlier this
week.
Against the dollar, the euro rose 0.2 percent to $1.3030
<EUR=>, up from this week's one-month low of $1.2888.
The Australian dollar and New Zealand dollar, two currencies
that tend to rise when equities climb, both gained against the
yen.
EYES ON STRESS TESTS
The Wall Street Journal reported that U.S. banks will be
briefed by regulators as early as Friday on how they performed in
the stress tests before the results are made public later.
Some estimates of banks' likely losses that were used in the
stress tests were tougher than expected, the newspaper said.
[]
"Investors will continue to be cautious until May 4, and the
market will likely fluctuate in reaction to both positive and
negative news that might come out in the meantime," said Masafumi
Yamamoto, head of FX Strategy Japan at the Royal Bank of
Scotland, referring to the date on which the test results are due
to be made public.
"What's behind the cautiousness is a view that the situation
surrounding U.S. banks is still severe, even though the worst may
be behind them," Yamamoto said.
The Australian dollar initially climbed against the yen after
Japanese beer maker Kirin Holdings <2503.T> said it had offered
to buy all shares in Australian brewery Lion Nathan <LNN.AX>.
[]
It briefly gave up its gains against the yen and the dollar
as Asian shares came under pressure, but later regained ground,
rising 0.8 percent to 69.54 yen <AUDJPY=R> and edging up 0.5
percent to $0.7094 <AUD=D4>.
(Additional reporting by Satomi Noguchi and Aiko Hayashi;
Editing by Joseph Radford)
