Yen rises in Asia as players shun risk

TOKYO (AFP) - The yen rose against other major currencies in Asian trade Friday as growing fears about the fallout from the US mortgage sector problems prompted investors to shun risky bets, dealers said.

They said that news that the eurozone and Japanese central banks had injected large amounts of cash into the financial system to try to stabilise money market interest rates had added to the sense of nervousness.

The dollar fell to 117.91 yen in late Tokyo morning from 118.17 yen in New York late Thursday.

The euro fell to 161.10 yen from 161.61, and to 1.3657 dollars from 1.3673.

Market players were "trying to avoid risks," noted Kenichi Yumoto, vice president at the forex sales department of Societe General in Tokyo.

"It would not be fair to say they are buying the yen -- the yen is firm as other currencies are sold" to unwind the high-risk carry trade, he said.

Carry trade is when investors borrow currency in countries with low interest rates, such as Japan, before using it to buy assets in countries with higher interest rates, such as Britain, Australia or New Zealand.

The yen was also boosted by the view that Japanese financial firms' exposure to the sub-prime woes is smaller than that of their US and European counterparts, he said.

"Japanese banks are still operating in a somewhat closed world.
They were not active in advancing into risky financial products such as sub-prime loans, which turned out to be good for them retrospectively," Yumoto said.

The Bank of Japan injected one trillion yen (8.5 billion dollars) into money markets Friday to try to ease a liquidity squeeze but the move failed to staunch sharp losses in domestic share prices.

The European Central Bank on Thursday injected a record 94.8 billion euros (130.2 billion dollars) into the eurozone banking market, while the US Federal Reserve made 24 billion dollars available to commercial banks.

The downturn in global stock markets began Thursday in Europe when French bank BNP Paribas announced it had suspended three funds exposed to troubles in the US subprime mortgage sector.

"Risk aversion (is) back on the agenda," noted Barclays Capital currency analysts.

"Higher levels of risk aversion saw about two percent losses in most European and North American equity bourses overnight and the yen strengthen against all of the majors as carry trades were unwound," they added.