Yen drops, dollar on defensive as central banks seek to reassure markets

TOKYO : Currency markets showed some cautious optimism after global authorities moved to stem contagion from a simmering banking crisis, with the safe haven dollar on the back foot and the yen tumbling amid a rebound in Treasury yields.

The currency market's"initial response has been a 'risk positive' one," Ray Attrill, head of foreign-exchange strategy at National Australia Bank wrote in a note to clients, pointing to the yen's slide and Aussie's rebound in particular. Although the banking system is the currency markets' most immediate focus, a Fed rate-setting meeting on Wednesday looms large. Traders are still of the view that a quarter point hike is likely, even though the global banking sector remains susceptible to contagion risks.

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