Yen Erases Gain Against Euro, Dollar After Japan Stocks Rebound

Forex outlook:

The yen erased gains as a rebound in Japanese stock prices stopped investors from reducing holdings funded by loans in the currency. The yen had risen to a three-month high against the euro as a slump in global stocks caused traders to pare so-called carry trades. It also retreated from a two-month high against both the Australian and New Zealand dollars. ``The rebound in Asian stocks is helping to restore some risk appetite,'' said Lee Wai Tuck, currency strategist at Forecast Singapore Ltd. ``This is causing some selling of the yen.'' The yen may decline to 119.20 per dollar and 163 a euro today, Lee said.

Any gains in the dollar may be limited by speculation data this week will show slowing U.S. consumer spending, fueling speculation the Federal Reserve will lower interest rates. Personal spending rose 0.1 percent in June, the least since September, according to a survey. The Commerce department will release the data at 8:30 a.m. in Washington tomorrow. The dollar has fallen 4.4 percent against the euro since personal spending, which accounts for about 70 percent of the economy, slowed from a five-month high in December.

``I expect the U.S. economy to slow and the Fed to lower rates in the fourth quarter,'' said Kenta Inoue, economist and currency analyst at Mitsubishi UFJ Securities in Tokyo. ``There's still room for rates to rise in Europe, so investors will start to favor European currencies over the dollar.''

Gold: Gold was little changed in Asia after the biggest weekly decline in almost two months on concern that global economic growth may slow, reducing the metal's appeal as a hedge against inflation. Silver was also little changed. Gold fell 3.3 percent last week amid a $2.1 trillion world stock market rout and concern that U.S. subprime mortgage losses may slow economic growth, reducing inflation. Investors usually buy gold at time of rising raw material prices to preserve wealth. ``Trading in the gold market will remain quiet'' as investors are waiting for ``equities and credit markets to stabilize,'' said Wallace Ng, chief precious metals trader in Asia Pacific at Fortis Bank in Hong Kong. ``Gold has already given back almost all of its gains in the past three weeks.''

Crude Oil: Crude oil slipped from a one-year high in New York as sliding world equity markets weighed on investor confidence. ``If the stock markets continue this volatility then people will liquidate their long positions in the oil market so they can get the cash,'' said Tetsu Emori, chief commodities strategist at Astmax Futures Ltd. in Tokyo. ``The market today may be thinking that the contract is overbought.'' The contract rose 2.8 percent to $77.02 a barrel on July 27, 1 cent short of the previous record close on July 14, 2006. Futures reached $77.24 on July 26, the highest intraday price for a front-month contract since Aug. 9. Iran, the second-largest producer in the Organization of Petroleum Exporting Countries, doesn't support an increase in oil production at the group's next meeting, said Shana, the oil ministry's press agency, yesterday. OPEC will meet in Vienna on Sept. 11 to review their production ceiling. 

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