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The yen gained sharply on Tuesday as profit-taking. Like the yen, the U.S. dollar found some speculators locked in profits in favour of the euro and commodity plays like the Australian dollar, though traders said both the yen and the dollar looked set to resume sliding after the profit-taking had run its course.
"When there are uncertainties, you just close your positions. At the moment, what a lot of people have is yen short positions so the yen is being bought back. But I don't see any change in the yen's downtrend," said a trader at a U.S. bank.
"Aftershocks in Japan hampered overall risk sentiment helping JPY to be the top performer overnight, even amid reports that the estimate of the severity of the Fukushima accident could be increased," said David Watt, strategist at RBC.
Japan raised the severity of its nuclear disaster to the highest level on Tuesday, citing accumulated levels of radiation released.
The IMF lowered its 2011 forecast for Japanese growth to 1.4 percent from 1.6 percent in its World Economic Outlook report yesterday, citing effects from the disaster. The forecast for next year was raised to 2.1 percent from 1.8 percent.
The Centre for European Economic Research's Survey on Economic Sentiment (ZEW) resulted in an index reading of 19.7 in April. The index deteriorated from a 31.0 print in March. The slide overwhelmed a market-based forecast at 29.8 on the index.
The pound fell against the dollar and the euro after a report showed U.K. retail sales dropped by a record in March, weakening the case for the Bank of England to raise interest rates from a record low. Sales at stores measured by value fell 1.9 percent from a year earlier, the British Retail Consortium said. That’s the biggest drop since the series began in 1995.
Pound retreated after weaker than expected inflation figures in the UK, which eases pressure on the BoE to hike interest rates. Consumer Prices Index slowed down to 0.3% advance in March and a 4.0% increase year-on-year, below the 0.7% and 4.4% respective increases in February, and the 0.6% and 4.4% readings forecasted by market analysts.
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