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The Yen falls against the Dollar as safe haven allure weakens

Tue, Feb 24 2009, 10:59 GMT
by Benny Menashe

Finotec Group Inc.  |  View company's profile

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The yen fell against the dollar before government reports this week that may show the world’s second-largest economy is deteriorating, reducing the allure of the currency. Japan’s currency also approached the weakest level in a month versus the euro after Prime Minister Taro Aso’s approval rating slumped 6.8 percentage points to 11.4 percent in a survey published today by Sankei newspaper. The dollar declined versus the euro on speculation a U.S. report today will show home prices fell at the fastest pace on record in December. “The yen appears to be losing some of its safe-haven status,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “Japan’s economic and political situation is poor. The yen is weakening.” The USD/JPY is currently trading at 95.25 as of 8:30am, GMT.

German business confidence may hold steady in February as executives weigh the government’s stimulus program and interest-rate cuts from the European Central Bank, a survey of economists shows. German lawmakers last week agreed to more than double the government’s fiscal stimulus to about 80 billion euros ($105 billion) to stem the country’s worst recession since World War II. The ECB has also signaled it will cut interest rates to a record low next month as the global economic slump prompts companies to reduce production and lay off workers. The International Monetary Fund expects the German economy, Europe’s largest, to contract 2.5 percent this year. “There is still hope that all the stimulus programs will help revive the economy in the second half of the year,” said Stefan Bielmeier, an economist at Deutsche Bank AG in Frankfurt. “The economy is at rock bottom at the moment and it can’t really get any worse.” The EUR/USD is currently trading at $1.2750 as of 9:05am, GMT.

Sterling rose broadly on Monday, hitting its highest in seven weeks against the Japanese yen, led by rallying stock markets after reports the U.S. government may boost its stake in embattled lender Citigroup. The pound also rose sharply against a weakened euro after European Central Bank chief Jean-Claude Trichet highlighted severe pressure on the currency zone's financial system. "Generally, we are just playing a little bit of the risk aversion side, with stocks rallying more broadly," said Naeem Wahid, currency strategist at Bank of Scotland Treasury Services."Higher risk currencies like sterling, the Australian dollar and the New Zealand dollar are all up on the day, and sterling is just getting that outperformance," he added. The GBP/USD is currently trading $1.4530 as of 9:20am, GMT.

Today's Economic Events

Published on  Tue, Feb 24 2009, 11:05 GMT

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