Dollar firmer against the yen after Swiss action

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TOKYO: The dollar held relatively firm against the yen in Asia on Wednesday as the market continued to digest the surprise move by the Swiss central bank to set a target to limit the strength of its currency.

The greenback fetched 77.43 yen in Tokyo trade against 77.68 yen in New York late Tuesday, after the US unit strengthened in the wake of the Swiss bank's action.

The euro traded at $1.4032, up slightly from $1.3992. The European common currency was flat at 108.68 yen compared to 108.70 yen.

The market was rangebound after the Swiss action prompted investors to seek an alternative safe haven Tuesday, boosting the dollar and the Norwegian krone.

"The currency market has calmed down in Asia," said Gen Kawabe, senior dealer at Chuo Mitsui Trust and Banking.

"There will be a lot of very burnt people overnight. Everyone is going to be licking their wounds," HiFX senior trader Stuart Ive told.

The Swiss National Bank on Wednesday took markets by surprise when it announced a minimum exchange rate of 1.20 francs per euro, saying the current value of the franc was a threat to the economy.

The Swiss central bank said it had "the utmost determination and is prepared to buy foreign currency in unlimited quantities," saying that the peg value was "still high" but that further measures could be taken if deflationary risks persisted.

The franc, which has surged by about 20 percent since 2009 as investors seek refuge from markets roiled by fears over the fragility of the European and US economies, dropped nearly 10 percent after the exchange rate was capped.

In Asian trade the euro was unchanged from overnight levels at 1.2060 francs. The dollar stood at 0.8587 Swiss francs, down from 0.8618 in late New York trading.

Switzerland is not a member of the European Union, but its economy is heavily dependent on exports, notably to the eurozone, and the rise of the franc is hitting industry and tourism hard.

In the wake of the Swiss central bank's announcement, the yen, which together with Swiss franc had been bought for its safe-haven characteristics, slid on speculation about a possible impact on Japanese currency policy.

Markets will be keeping a close eye on a Group of Seven meeting of finance ministers and central bank chiefs starting Friday.

Japan's reaction to the Swiss central bank move will be of interest as there is some speculation they could follow suit, analysts said.

But Kawabe noted, "The yen weakened overnight but its rise is likely to be capped at levels above 78 yen per dollar on brisk demand from Japanese exporters to sell dollars at the levels."

"The market is awaiting the end of the Bank of Japan's policy meeting," on Wednesday for any measures to help boost the economy, he said. (AFP)