* Dollar, euro at 1-month highs vs yen after overnight rally
* Macro funds seen selling USD/JPY as Japan logs first
deficit since 1980
* Nov. 29 high, 200-day avg form key resistance at 78.30-35
* Aussie up on better-than-expected underlying inflation
By Antoni Slodkowski
TOKYO, Jan 25 (Reuters) – The yen dropped to one-month
lows against the dollar and the euro on Wednesday, as traders
took data showing Japan had logged its first annual trade
deficit since 1980 as a cue to snap up gains in the Japanese
currency.
Selling in the yen picked up steam on the back of unwinding
of yen long positions placed by speculators, with model and
macro funds also spotted pressuring the Japanese unit.
Tokyo exporters limited the downside for the yen, showing
strong dollar-selling interest right below 78 yen, after the
safe-haven yen on Tuesday suffered its biggest one-day fall
since Japan intervened in the market in October.
Japan logged an annual trade deficit in 2011 for the first
time in over 30 years after the March earthquake, tsunami and
nuclear crisis pushed up energy imports and the strong yen and
supply chain disruptions weighed on exports.
Takuji Okubo, chief economist at Societe Generale in Tokyo,
was sceptical the data would have a lasting impact on the yen.
“Japan’s current account balance is still in surplus, as the
income from Japan’s vast foreign assets, both direct investment
as well as its security investments, is more than offsetting the
deficit from trade. In addition, capital flows are much more
important for the yen than trade flows,” Okubo said.
The dollar reached as high as 77.98 yen on trading
platform EBS, its highest level since late December, and traders
said it was likely to extend these gains later in the session.
“I wouldn’t be surprised if hedge funds pushed the pair to
trigger stop losses above 78.20,” said a trader for a Japanese
bank in Tokyo, adding that Dec. 23 high of 78.23, and Nov. 29
peak of 78.29 are the key levels.
But chartists said that any gains above these points may
prove fleeting, as the greenback would have to battle thick
resistance posed by the 200-day moving average at 78.35 yen and
the 61.8 percent retracement of the October-January fall at
78.31.
The broad weakness in the yen saw the euro hit a four-week
peak of 101.56 yen. The pair was trading above 109 yen
as recently as November, before falling to an 11-year low of
97.04 on Jan. 16.
Many Japanese exporters set their euro rate targets at 105
yen, so the pair would run into heavy selling pressure ahead of
that level, traders said.
EURO HOLDS STEADY
With the yen stealing the show on Wednesday, the euro fared
reasonably well against the dollar, after EU data showing a
surprising strength in manufacturing and services this month
held out hope the euro zone may escape recession.
Portugal also eased market jitters after its prime minister
said the country was not seeking to renegotiate or extend its 78
billion euros bailout from its creditors.
The single currency fetched $1.3024, little changed
from late New York levels and not far off a three-week peak of
$1.3063 struck on Tuesday.
However, with no definite outcome on Greece’s debt swap
talks and the threat of the country’s ratings being cut to
‘selective default’ by Standard Poor’s, the euro’s outlook
remains uncertain.
The Australian dollar gained 0.3 percent to $1.0518
, coming close to a three-month peak of $1.0574 set
earlier in the week after a stronger higher-than-expected
reading of underlying inflation.
Market focus now shifts to the Fed which will begin a new
practice of announcing policymakers’ interest rate projections
when a two-day meeting ends on Wednesday.
Economists polled by Reuters expect the Fed will signal that
it is unlikely to start hiking interest rates until the first
half of 2014, more than five years after chopping them to near
zero.
(Additional reporting by Ian Chua in Sydney and Lisa Twaronite
in Tokyo; Editing by Chris Gallagher)
