* Yen retreats from 2-week high vs euro
* Yen still retains overall firm tone on risk aversion
* Sterling hits 6-1/2-year low vs dollar
* RBA intervenes to prop up sliding Aussie
By Kaori Kaneko
TOKYO, Nov 13 (Reuters) - The yen retreated from a two-week
high against the euro on Thursday as short-term players locked in
profits.
But the yen retained its overall strength as investors
remained risk averse and favoured the perceived safety of the
Japanese currency amid fears of a global recession.
Wariness toward risk battered the Australian dollar, which
fell to a two-week low of $0.6348 <AUD=D4> in late New York trade
the previous day, forcing the Australian central bank to
intervene and prop up the currency early on Thursday.
Sterling touched a six-and-a-half year low versus the dollar
after the Bank of England warned that the British economy will
shrink sharply next year and bolstered expectations for further
aggressive rate cuts. []
Asian shares tumbled following a sharp downturn in U.S. stocks
the previous day.
Tokyo's Nikkei average <> dropped more than 5 percent
after Wall Street shares plunged as the U.S. Treasury backed away
from using its $700 billion financial bailout to buy bad
mortgages. [] []
Uncertainty about how the U.S. government plans will revive
bank lending and dismal news from corporations deepened investor
concerns and kept the yen's appeal intact.
"The yen shed earlier gains partly through some actual demand
(from foreign investors) for repatriation purposes," said Yuji
Saito, head of FX sales at Societe General.
Capital fund flows data released by Japan's Ministry of
Finance on Thursday showed that foreign investors sold a net
198.0 billion yen ($2.07 billion) of Japanese stocks and a net
573.8 billion of Japanese bonds during the week ended Nov. 8.
[]
But traders said the risk aversion theme had not changed,
with the yen likely to be supported in the longer term.
The euro rebounded to 119.20 yen <EURJPY=R> on trading
platform EBS, up 0.3 percent from late U.S. trade. Earlier on
Thursday it briefly fell as low as 117.65 yen, the lowest since
Oct. 28.
"Cross/yen tends to be sold while dollar/yen is also weak as
the yen is being used as a currency for flight (from risky
assets)," said Mitsuru Sahara, a senior manager at Bank of Tokyo
Mitsubishi UFJ.
The dollar recovered from the day's low of 94.53 yen to 95.54
yen <JPY=>, up 0.5 percent on the day. Short-term speculators who
bought the yen from around 97 yen sold the Japanese currency back
to book profits, traders said.
Sterling dipped 0.4 percent to $1.4895 <GBP=D4> after
touching $1.4829, the lowest since mid-2002.
The BoE's indication of more interest rate cuts added to
expectations for further monetary easing by the European Central
Bank, sending the euro to a two-week low against the dollar
earlier in the day, traders said.
A Reuters poll of 57 economists, taken after the BoE issued
its quarterly Inflation Report on Wednesday, produced a
prediction for rates to fall further than previously forecast,
bottoming out at 1.5 percent in the second quarter compared to
2.0 percent in a poll last week. []
The BoE's outlook that inflation could drop below 1 percent
in two years --half its target and much lower than the current
5.2 percent-- is an indication that the central bank thinks
further cuts are necessary, analysts said.
The euro fell 0.3 percent to $1.2461 <EUR=> after slipping to
$1.2435.
The Aussie inched up 0.2 percent to $0.6388 <AUD=D4> hitting
a high of $0.6445.
($1=95.62 Yen)
(Additional reporting by Satomi Noguchi and Shinichi Saoshiro;
Editing by Michael Watson)
