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

Wed Jan 20, 2016 6:51am EST
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* Yen up 1 pct after as world's stock markets tumble

* Canadian dollar braces for potential rate cut

* Pound near seven-year low on BoE's Carney comments (Adds quote, updates)

By Anirban Nag

LONDON, Jan 20 (Reuters) - The yen soared on Wednesday after crude oil prices fell to near 13-year lows and risk appetite waned, with the dollar dropping to a one-year low as investors revised expectations of how much the Federal Reserve would raise interest rates.

The dollar fell 1.3 percent to 115.97 yen in London trade, its lowest since January 2015. It recovered to 116.48 yen on reports an unnamed Japanese official said Tokyo was closely watching the market.

The dollar had risen to 118.115 on Tuesday, after risk appetite showed signs of recovering amid a bounce in crude oil prices and hopes of further stimulus in China.

But the rally fizzled out when oil resumed its downward slide, hurting sentiment towards stocks and encouraging investors to buy safe-haven assets like the yen, Swiss francs , German Bunds and U.S. Treasuries.

"The yen has shown maximum sensitivity to risk sentiment in the recent weeks," said Manuel Oliveri, a Credit Agricole currency strategist. "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...