* Yen hits new 3-month low of 97.35 per dollar
* Yen on defensive as safe-haven status continues to fade
* Japan exports plunge a record 45.7 pct in January
By Shinichi Saoshiro
TOKYO, Feb 25 (Reuters) - The yen fell across the board on
Wednesday, hitting a fresh three-month low against the dollar as
its perceived safe-haven status continued to crumble on a rapidly
weakening Japanese economy and domestic political woes.
Along with the dollar, the yen had served as a safe-haven
unit this year amid slides in stock markets worldwide, but it
began losing its appeal when data last week showed Japan's
economy shrank the most in 35 years during the October-December
quarter.
Japan's exporters, the main driver for the economy, have been
hurt amid the global economic slump and data released on
Wednesday showed exports plunged a record 45.7 percent in January
from a year earlier. []
"The yen has turned vulnerable as many beliefs about Japan
have become a thing of the past, and one of those was that the
economy has the support of a big trade surplus," said Tsutomu
Soma, senior manager of the foreign securities department at
Okasan Securities.
The yen has also been under pressure after Japan's finance
minister suddenly resigned last week, fanning fears of political
instability, and traders add that yen demand resulting from
derivatives' unwinding has also ebbed.
Traders said the yen's retreat on Wednesday was led by hedge
funds unwinding long positions on the Japanese currency,
initially formed on expectations it would strengthen as Japanese
investors repatriate funds towards the March fiscal year-end.
A lack of persistent dollar selling by Japanese exporters,
who usually sell the greenback when it appreciates against the
yen, has also hastened the yen's fall, they said.
The dollar rose 0.7 percent to 97.32 yen <JPY=> after
touching a three-month high of 97.35 yen on trading platform EBS.
The euro gained 0.5 percent to 124.79 yen <EURJPY=R> after
hitting a seven-week high of 125.01 yen on EBS. The yen also fell
against sterling and the Australian dollar.
The euro dipped 0.1 percent to $1.2831 <EUR=>.
HEDGE FUNDS LIGHTEN POSITIONS
Market players said technical moves were also behind the
dollar's push above the 97.00 yen threshold on Wednesday.
"There was no fresh news behind the dollar jump. Some
participants wanted to take out knockout options at the key level
before they expire," said a trader at a large Japanese bank.
"Hedge funds and foreign institutional investors are also
continuing to lighten their yen long positions on the ongoing
Japan-negative theme," the trader said.
Unlike the yen, the greenback's safe-haven status has stayed
intact, drawing demand on Tuesday from risk averse investors
after a report showing U.S. consumer confidence plunged to
another record low in February. []
Impetus also came after the dollar broke through technical
chart levels, with the U.S. unit jumping above 96 yen on Tuesday,
a 38.2 percent retracement of its fall between August and
January.
The focus is on if and when the yen's broad retreat will end.
"The yen has lost a lot of ground and its retreat could slow
soon, although that depends on whether speculators have finished
unwinding their positions on the yen," said Koji Fukaya, a senior
currency strategist at Deutsche Securities.
"Yen bears should keep in mind that Japanese investors could
still repatriate funds," Fukaya said.
Analysts said repatriation by Japanese investors could
accelerate if they suffer further losses on their domestic equity
holdings and are forced to send funds back home.
Tokyo's Nikkei stock average <> jumped 2.7 percent
following a media report that the Japanese government may buy
shares from the market, but the index still remained within sight
of a 26-year low struck in October. []
(Additional reporting by Rika Otsuka; Editing by Edwina Gibbs)
