Yen rises before G20 meeting as global economy enters into a recession

The Japanese yen rose, heading for weekly gains against the dollar and the euro, as signs of a deepening global economic slump prompted investors to pare holdings of higher-yielding assets funded in Japan. Japan's currency climbed this week against the Australian and New Zealand dollars on speculation a Group of 20 nations summit starting today will fail to reach a consensus on how to tackle the credit crisis. ``I'm looking for the yen to strengthen against the dollar,'' said Takeshi Tokita, vice president of foreign- exchange sales in Tokyo at Mizuho Corporate Bank, a unit of Japan's second-largest publicly traded lender. ``No one is sure what will come out of the G-20. It's likely that the U.S. and Europe won't see eye to eye on many of the problems the global economy is facing.'' The USD/JPY is currently trading at 97.00 as of 8:40am, GMT.

The Sterling headed for a record weekly decline against the euro and slid versus the dollar in the period on mounting evidence the economy, Europe's second biggest, is gripped by a recession. The pound reached an all-time low yesterday against the euro and traded below $1.50 today for a third day. The Bank of England indicated on Nov. 12 it will keep cutting interest rates as the economy slumps. ``The pound is very vulnerable now and may extend its already sharp declines,'' said Lee Hardman, a currency strategist in London at Bank of Tokyo-Mitsubishi Ltd. ``It is hard to see any signs of optimism for the pound at the moment.'' The GBP/USD is currently trading at $1.4875 as of 8:48am, GMT.

The dollar rebounded versus the euro, making up for some of the previous day's losses, with investors eyeing euro zone growth data for the third quarter. The data, due at 1000 GMT, is expected to confirm the euro zone is in recession. "The anxiety caused by the financial market turmoil has not disappeared from the market's overall tone. So demand for the dollar and the yen driven by flight-to-safety will likely remain," said Yousuke Hosokawa, senior manager at Chuo Mitsui Trust and Banking. The EUR/USD is currently trading at $1.2675 as of 9:10am, GMT.

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