Yen gains after Portugal bank woes unsettle stocks

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The yen was poised to end the week higher on Friday, having jumped to a five-month peak against the euro overnight as banking woes in Portugal drove global equities lower and lifted demand for the safe-haven currency.

Fears over financial troubles at the family-owned holding companies behind Portugal's largest listed bank had unsettled European markets on Thursday. That in turn weighed on Wall Street and there was a knock-on effect in some Asian bourses on Friday.

The euro last traded near 138 yen, not far from 137.50, its lowest since early February. The dollar was near 101 yen after touching a seven-week low of 101.06. The Aussie fetched 95 yen, following a dip to a five-week low of 94.66.

Against the dollar, the common European currency was under $1.36 from a session high of $1.3651.


Details of Portugal's banking woes were complicated and left markets in two minds about whether this was a bank-specific event or something more systemic. The fact that Wall Street managed to close off the session low and U.S. Treasuries saw only modest bids suggested that investors initially overreacted to the news.

"The Portuguese banking trouble appears contained, as shown by the limited decline in U.S. stocks and with none of the emerging market currencies falling more than 1 percent against the dollar. It's difficult to simply label the situation 'risk off'," said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.

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"Treasury yields and U.S. and Japanese monetary policies remain drivers of the yen. True, the Portuguese banking woes did strengthen the yen, but I see this more as a result of the dollar being sold as Treasury yields fell," he added.

The Treasury 10-year note yield briefly fell to a five-week low of 2.494 percent on Thursday before pulling back above the 2.500 percent threshold.

--By Reuters.