Forex News – Yen gains on safe haven demand

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Asian markets fell at the start of the new trading week and currency markets were mostly flat. The MSCI Asia Pacific Index of shares dropped 1.1 percent and the S&P 500 Index futures fell 0.8 percent.

Euro was flat in the Asian session trading in a 1.3504-1.3532 range against the dollar as risk sentiment was damp following news from Europe and the US.

The focus was again on euro-zone-debt developments. Spain’s elections resulted in a new conservative government winning. The new Prime Minister, Mariano Rajoy, told the country to brace for difficult times ahead. While a change of government may be seen as a positive, investors prefer to wait and see how the new leadership will implement the austerity measures to bring the country out of debt.

Meanwhile, in the US, the deficit-cutting congressional super-committee reached a deadlock on budget negotiations. The committee is expected to announce today that it has failed to reach agreement on at least $1.2 trillion in federal budget savings.

The yen also gained on safe haven demand as risk aversion pushed investors to protect their assets and exited from higher yielding riskier currencies. Yen gained against the euro and the dollar. EURJPY fell from 104.05 to 103.81 and USDJPY dropped to 76.75 from 76.92.

Meanwhile data today showed Japan’s exports fell the first time in three months, signalling weaker growth as the effects of the euro zone debt crisis are hurting the region.