LONDON, Aug 28 (Reuters) - Sterling eased against a broadly resurgent yen on Tuesday as a run of soft U.S. housing data and falling equity markets kept investors cautious about risky carry trade investments in the high-yielding pound.
With no first-tier British data, the currency took its cue from increased risk aversion which reduced the appeal of buying high-yielders like sterling via cheap borrowing in, for example, the yen.
Risk aversion resurfaced as soft data from the U.S. housing market over the past two days has stoked worries about how much the world's biggest economy will be affected by the deterioration of the subprime mortgage market.
"(Markets are moving on) news from the U.S. and continuing nervousness about the credit issues. It's typical that when the carry trade does badly, sterling depreciates against the euro and the dollar, and that's what we've seen today," said Paul Robinson, currency strategist at Barclays Capital
By 1403 GMT, the pound was down 0.7 percent at 231.10 yen <GBPJPY=R>. Against the dollar it was a touch softer at $2.0101 <GBP=>.
The euro was up 0.12 percent at 67.89 pence <EURGBP=>, getting an extra boost from stronger than expected German Ifo business confidence and euro zone M3 money supply data earlier in the session. British housing data on Thursday -- including mortgage lender Nationwide's house price survey for August and the Bank of England's mortgage lending figures for July -- could give sterling new direction.
Until then, though, analysts say the pound is likely to track swings in risk appetite and moves in equity markets.
Source supplied by: Reuters
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