* Falling stocks fan demand for yen, low-yielding euro up
* Dollar outperforms higher-yielding, riskier currencies
* Fed's Brainard speech awaited for near-term impetus
(recasts, adds details)
By Anirban Nag
LONDON, Sept 12 The safe-haven yen was the
winner on Monday as investors sold stocks and riskier assets
including commodities, but the dollar outperformed
higher-yielding currencies on fresh talk of an interest rate
hike by the Federal Reserve in the near term.
The focus will be on Fed Governor Lael Brainard's speech
later in the day. The timing of a speech by the Fed's most-noted
dove, just before the Fed's Open Market Committee blackout
period, is too much of a coincidence for many in the markets
with some expecting her to send a signal that further tightening
The dollar was 0.4 percent weaker against the yen and
0.2 lower against the euro, but rose against the
higher-yielding Australian dollar and was firmer across
the board against most emerging market currencies.
The currency market was also keeping an eye on the sell-off
in global bonds, with perceived limits to central bank policies
having taken German and Japanese sovereign bond yields to
multi-month highs. U.S. Treasury yields have also tracked their
global peers higher, underpinning the dollar.
"Rising bond yields have the potential to put risk assets
under significant selling pressure," said Hans Redeker, head of
currency strategy at Morgan Stanley.
"A risk-averse trading strategy suggesting lower emerging
markets and commodities and a higher dollar seems warranted. The
dollar may rally 3 percent from here, but we think it is too
early to assume a long-term rally to resume from here," he
While the stock market's fall was the main driver behind the
yen's rise, the Japanese currency got a boost earlier in the
Asian session from safe-haven flows in reaction to Democratic
candidate Hillary Clinton falling ill at a Sept. 11 memorial
ceremony and diagnosed with pneumonia.
Markets are mostly expecting Clinton to win the presidency
in November and have not factored in the implications, both
economic and for national security, should Republican nominee
Donald Trump prevail.
A spate of Fed speakers kept hopes alive for a September
rate hike, despite some recently disappointing economic data
including only a modest rise in U.S. nonfarm payrolls.
After Boston Federal Reserve President Eric Rosengren
spoke on Friday, odds on a rate hike in September rose to a 30
percent probability from 24 percent before his comments. Some
analysts said Rosengren's upbeat comments have set the stage for
something similar from Brainard, despite subdued data.
"Brainard's speech will be the last scheduled appearance
from a Fed policymaker ahead of the pre-meeting blackout period
and many market participants see this as a last opportunity to
for the Fed to fine-tune expectations ahead of the meeting,"
Credit Agricole analysts said in a note.
Speculators increased their bets on the U.S. dollar for the
first time in six weeks in the week ended Sept. 6, according to
Reuters calculations and data from the Commodity Futures Trading
Commission released on Friday.
(Editing by Andrew Heavens)