FOREX-Yen hits 1-year high vs dollar as risk appetite wanes with oil

Wed Jan 20, 2016 3:52am EST
 
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* Yen sought after as world's stock markets tumble

* Canadian dollar braces for potential interest rate cut

* Pound struggles near 7-year low on BoE's Carney comments (Adds quotes, updates)

By Anirban Nag

LONDON, Jan 20 (Reuters) - The safe-haven yen soared on Wednesday, as risk appetite soured after crude oil prices fell to near 13-year lows, dragging the dollar to a one-year low with investors trimming the chances of more tightening by the Federal Reserve.

The dollar fell more than 1.2 percent to 116.10 yen in London trade, its lowest since January 2015. The dollar had risen to 118.115 on Tuesday, after risk appetite showed tentative signs of recovery amid a bounce in crude oil prices and hopes of further stimulus in China.

But that rally fizzled out with oil resuming its downward trek, hurting sentiment towards stocks and encouraging investors to buy yen, Swiss francs, German Bunds and U.S. Treasuries.

The euro, a low-yielding currency used by investors to fund riskier positions, also rose against the dollar to $1.0943 . But it underperformed the yen, and was down 0.7 percent at 127.34 yen.

"The yen has shown maximum sensitivity to risk sentiment in the recent weeks," Credit Agricole currency strategist, Manuel Oliveri, said. "The upside for the yen, though, is likely to be capped before the Bank of Japan meeting next week, given they too are struggling with weakening inflation prospects."   Continued...