Yen softens in Asian trade as investor jitters ease

TOKYO : The yen softened against the dollar and euro in Asian trade on Tuesday on profit-taking as fears over a default crisis in Dubai eased, dealers said.

Investors were eyeing a fresh batch of economic indicators in the United States and Europe, as well as an interest rate decision in Australia.

The euro firmed to 1.5010 dollars in Tokyo morning trade from 1.5005 in New York late Monday, and to 129.60 yen from 129.50. The dollar edged up to 86.37 yen from 86.28.

"There remains some uncertainty around Dubai, which is likely to weigh on risky assets in the near term, but we believe the impact of the Dubai shock is likely to be rather short-lived," Barclays analysts told clients.

"Some corrections in the overstretched currencies are possible once the concern abates," they added.

Jitters eased after news that the Gulf city-state's flagship conglomerate Dubai World will restructure 26 billion dollars in debt of some of its companies.

The United Arab Emirates central bank over the weekend has also pledged to provide additional liquidity in the banking sector.

The Dubai government's debt freeze announcement last week had rocked markets as investors feared a possible default by Dubai and its state-owned businesses, which together owe an estimated 80 billion dollars.

The most recent announcement helped improved investor risk-appetite and a rebound in global share prices overnight, NAB Capital strategist John Kyriakopoulos said.

Risk appetite was also supported on news that India grew 7.9 percent in the third quarter, much stronger than what analysts had expected and prompting speculation that its central bank will raise lending rates.

Market players were eyeing an interest rate decision by the Reserve Bank of Australia later in the day which is expected to raise rates by 25 basis points to 3.75 percent. It has hiked rates twice since October.

The United States will also release its factory data for November, with traders predicting that manufacturing activity continued to expand albeit at a slower pace than in October.

The eurozone will also release its October unemployment rate which is likely to remain just below 10 percent, with some differences among member nations, analysts said.