Yen mixed in Asia as risk-takers return

TOKYO (AFP) - The yen was mixed in Asian trade Friday as some investors gradually returned to risky bets following recent market turbulence while others preferred to remain cautious, dealers said.

"Stability has returned momentarily to the market with investors taking a breather while regaining some of their appetite for risk," said Kazuhiko Shibata, Tokyo branch manager at Dresdner Bank.

Investors were inching their way back to high-risk bets known as "carry trades," dealers said. A carry trade is when the yen is used as a source of low-cost funding for higher-yielding assets elsewhere.

The Bank of Japan on Thursday left its benchmark interest rate at 0.5 percent -- the lowest of any major economy -- in the wake of the market turmoil.

The rout on global stock markets and currency markets last week and early this week had pushed up the yen as bearish players unwound risk, sending those high-yielding currencies tumbling down.

The dollar slipped to 116.10 yen in Tokyo afternoon trade from 116.28 in New York late Thursday.

The euro was flat at 1.3566 dollars but slipped to 157.52 yen from 157.76.

The yen fell more sharply against higher-yielding currencies. The British pound firmed to 232.56 yen in Tokyo afternoon trade from 231.84 in New York and the Australian dollar rose to 95.38 yen from 95.35, its highest level in three days.

The market problems stemmed from the US home loan market where borrowers with shaky credit histories defaulted on their mortgages, triggering fears of a liquidity shortage as investors scrambled to cover their losses.

"It's too early to sound the all clear on a credit crunch," wrote NAB Capital stretegist John Kyriakopoulos in a note to clients.

Dresdner Bank's Shibata said: "Banks have enough liquidity, but it's not as if the cash has made its way to troubled companies. There is still uncertainty in the long run and I doubt this will end in a just a few weeks."

US Federal Reserve data showed that commercial paper -- short-term debt companies issue to finance their needs -- has fallen, suggesting lenders remain cautious over lending money except to the most creditworthy clients.

But confidence was also soothed as French banking giant BNP Paribas said it would unblock three of its investment funds whose suspension earlier in the month sparked turmoil on global stock markets.

The Bank of Japan, which pumped in billions of yen into its financial system, on Friday withdrew 300 billion yen out of its money market, the first time it mopped up liquidity in seven days.

The US Federal Reserve on Thursday pumped in a fresh 17.25 billion dollars, rekindling investor worries of the depth of the credit turbulence, Shibata said.

The market widely expects the Fed to cut its funds rate from 5.25 percent next month after last Friday it cut its discount rate -- the rate the Fed charges to commercial banks.

The dollar firmed to 942.05 South Korean won from 941.70, to 46.77 Philippine pesos from 46.40, to 9,410 Indonesian rupiah from 9,375 and to 1.5238 Singapore dollars from 1.5228.

The greenback slipped to 32.44 Thai baht from 32.53 and stayed flat at 32.96 Taiwan dollars.