* Yen edges back to 100 per dollar
* Caution before major U.S. banks report next week
By Charlotte Cooper
TOKYO, April 9 (Reuters) - The yen drifted lower against
the dollar on Thursday, eating into some of its gains made the
previous day, but market activity slowed ahead of the Easter
holiday weekend.
Volatility in stock markets has been buffeting investors'
risk appetite, prompting them to cut bets built in recent weeks
on higher-yielding currencies like the Australian dollar and
helping the yen recover from multi-month lows hit this week.
But while Asian share markets and S&P futures <SPc1> rose
on Thursday, with Japan's Nikkei average <> heartened by
an economic stimulus plan, the currency market was unwilling to
build positions ahead of earnings reports by major U.S. banks
next week.
Financial sector woes continued to dominate market
thinking.
"The market overall is quiet before the Easter holiday and
U.S. banks earnings," said one trader at a Japanese bank.
The U.S. government is testing how the largest U.S. banks
would fare under more adverse economic conditions than are
expected, in an attempt to assess the firms' capital needs.
But a source said earlier in the week the Treasury was
planning to delay the release of any completed bank stress test
results until after the first-quarter earnings season, in order
to avoid complicating the stock market's reaction.
[]
The dollar rose 0.3 percent to 100.10 yen <JPY=> after
falling about 0.8 percent on Wednesday. It rose as high as
101.45 yen on Monday to strike a six-month peak.
Traders said a 3.7 percent gain in the Nikkei index had
prompted some light selling of yen back to 100 per dollar, with
the two often moving inverse to each other.
The euro edged up 0.3 percent to 132.94 yen <EURJPY=R>,
well off a six-month high of 137.42 yen hit earlier this week.
It eased 0.1 percent to $1.3265 <EUR=>.
Data showed Japan's machinery orders, a leading indicator
of corporate spending, unexpectedly rose in February, a rare
positive sign as the country suffers its worst recession since
World War Two.[]
The figure will be welcome news for the ruling party, which
unveiled a record $154 billion stimulus plan on Thursday,
equivalent to 3.1 percent of GDP. [].
Traders said expectations of the stimulus package helped
the yen's rebound against the dollar and the euro in the past
few days but investors would refrain from pushing it higher for
now.
"Investors will remain cautious as they wait to see how
effective this will be," said Kazuyuki Kato, treasury manager
at Mizuho Trust & Banking Co Ltd.
Capital flows data showed foreign investors turned net
buyers of Japanese stocks last week for the first time since
late November and Japanese investors sold a net 2.11 trillion
yen ($21.16 billion) of foreign bonds as they moved into the
new financial year.
"That would suggest on the face of it that's yen positive
but the price action in dollar/yen (last week) would tell you
otherwise," said Sue Trinh, senior currency strategist at RBC
Capital Markets in Sydney.
"There looks to be an interesting two-way tug-of-war
between those who want to push dollar/yen higher on the back of
the risk appetite story and the real money flows suggesting
dollar/yen should actually go lower," Trinh said.
The Australian dollar slipped after data showed Australia
shed jobs at the fastest pace in six years in March, fuelling
expectations its central bank would have to cut interest rates
again after a quarter point easing to a record low of 3.0
percent this week.
The currency initially dipped to $0.7051 <AUD=D4> but later
rose 0.6 percent on the day to $0.7142.
($1=99.70 Yen)
(Editing by Kazunori Takada)
