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The YEN falls as risk appetite increases on U.S stimulus

Mon, Jan 5 2009, 10:38 GMT
by Benny Menashe

Finotec Group Inc.

The yen falls against the euro on speculation U.S. fiscal stimulus and gains in global stocks will give investors confidence to buy higher-yielding assets. Japan’s currency also slipped against the Australian and New Zealand dollars as U.S. President-elect Barack Obama crafted a package of infrastructure spending and tax cuts to create 3 million jobs. “Stock markets are showing signs of stability, and that’s pulling the yen lower,” said Tokichi Ito, deputy general manager of foreign exchange in Tokyo at Trust & Custody Services Bank Ltd., a unit of Japan’s second-largest publicly traded lender. “There’s also increased confidence in U.S. assets, which is pushing the dollar higher.” The USD/JPY is currently trading at 92.83 as of 8:43am, GMT.

The pound against the dollar, the longest run of declines since September reports also showed U.K mortgage approvals fell and manufacturing shrank. The Bank of England said lenders granted 27,000 loans to buy homes in November, down from a revised 31,000 a month before.
Manufacturing contracted for an eighth month in December as the economic slump deepened, a separate report showed. “You will continue to see downward pressure on the pound,” said Neil Mellor, a currency strategist in London at Bank of New York Mellon Corp. “The market is going to take some convincing that the BOE will not slash rates further.” The GBP/USD is currently trading at $1.4450 as of 8:55am, GMT.

European stocks were set to rise on Monday, gaining ground for the fifth session in a row as buoyant oil prices lend support to energy shares while investors welcomed U.S. President-elect Barack Obama's plan for massive tax cuts. But investors could remain cautious after both Janet Yellen, president of the San Francisco Federal Reserve Bank, and Lucas Papademos, vice president of the European Central Bank, highlighted over the weekend the risks of deflation an economically damaging spiral of falling prices and demand. The EUR/USD is currently trading at $1.3680 as of 9:120am, GMT.

Today's Economic Events

Published on  Mon, Jan 5 2009, 10:43 GMT