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Yen Declines As European Equities Rally

The Japanese yen declined against its major rivals, barring the Swiss franc, in early European trading on Tuesday as a rally in European stocks prompted traders to reduce holdings of lower-yielding currencies.

European stocks rebounded as positive trade data from China helped ease lingering concerns over debt-ridden Greece.

China's trade balance recorded a surplus of $11.4 billion in April, much higher than $140 million recorded in the previous month and also higher than the $3.2 billion expected by economists.

U.K.'s FTSE 100 index is currently up 0.83 percent or 49.18 at 5,992.16, France's CAC 40 is trading higher at 0.74 percent or 29.80 points to 4037.06 and Germany's DAX is currently up 1.03 percent or 75.68 points to 7486.84.

The yen gained in early Asian deals as traders bought the safe-haven Japanese currency after Standard & Poor's on Monday downgraded sovereign ratings of Greece citing rising rescheduling risk. The agency also retained the ratings on CreditWatch, with negative implications.

The downgrade reflects the rating agency's assessment of rising sentiment among major eurozone official creditors of Greece to extend the debt payment maturities of their EUR 80 billion of bilateral loans pooled by the European Commission.

The yen slipped to a 6-day low of 87.26 against the Australian dollar around 3:50 am ET. This was down from its Asian session's high of 86.27. If the yen weakens further, 88.20 is seen as the next likely target level.

The yen slipped to a 4-day low of 80.89 against the US dollar, 64.14 against the NZ dollar and 84.06 against the Canadian dollar around 3:50 am ET from its Asian session's 4-day highs of 80.17, 63.51 and 83.14, respectively. On the downside, the Japanese currency may find target levels at 81.30 against the greenback, 64.30 versus the kiwi and 84.70 against the loonie.

The Japanese currency also fell to a 4-day low of 132.53 against the pound around this time, down from a session's high of 131.50. The next downside target for the yen is likely to be seen around the 133.0 level.

The yen slipped to as low as 116.24 against the euro around 3:50 am ET, after having jumped to a new 6-week high of 114.81 in the Asian session. The euro-yen pair is presently worth 115.80 with 116.50 seen as the next likely target level.

On the flip side, the yen traded mostly higher against the Swiss franc and reached a 4-day high of 91.68 around 3:20 am ET after a report showed that Switzerland's annual inflation eased to 0.3 percent in April from 1 percent in March. Economists had expected it to slow to 0.6 percent in April.

On a monthly comparison, the consumer price index edged up 0.1 percent in April, slower than the expected increase of 0.5 percent.

Meanwhile, Switzerland's consumer confidence index dropped to minus 1 in April from 10 points in the previous quarter. Economists had expected it to remain unchanged at 10 in April.

Looking ahead, the U.S. import and export price indexes for April and the wholesale inventories for March are expected in the New York morning session.

by RTT Staff Writer

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