The Yen gains against the Dollar and the Pound as world economy continues to fla

The Japanese yen approached its strongest level since 1995 versus the dollar and was set for its best weekly gain in three months against the pound as concern the global slowdown will worsen spurred demand for Japan’s currency. Sterling fell versus the dollar and declined against the euro before a U.K. report that may show Britain’s economy shrank last quarter by the most since 1990. The euro was poised for a fourth weekly loss against the dollar before a report that economists say will show European manufacturing and service industries contracted for an eighth month in January. “The U.K. and the euro zone seem to be the worst off among the major economies,” said Satoshi Tate, a senior vice president in the foreign-exchange division in Tokyo at Mizuho Corporate Bank Ltd. “Risk aversion is still prominent among some investors, so the yen is likely to remain a haven currency.” The USD/JPY is currently trading at 88.36 as of 8:30am, GMT.

Sterling slipped again on Thursday, trading low against the dollar on concern that the UK is heading for a deep financial crisis while the economy heads towards a recession. The pound struggled, hovering above $1.3620 hit on Wednesday for the first time since September 1985, as UK shares remained volatile following deep losses early this week on speculation that another government bailout plan may not be enough to save the banking sector. Figures showing a tumble in UK factory orders and a drop in automobile output also gave investors reason to sell sterling, as they bolstered the view that the Bank of England will have to do more than cut interest rates to salvage the economy. Analysts said that sterling continued to suffer from extreme risk aversion given the dismal state of the British banking system. The GBP/USD is currently trading at $1.3665 as of 8:50am, GMT.

Timothy Geithner’s warning that President Barack Obama believes China is “manipulating” its currency may trigger renewed tensions between two of the world’s three biggest economies. Geithner, Obama’s nominee for Treasury secretary, also told senators the administration will press China to “adopt a more aggressive stimulus package” to boost its domestic economy. The remarks on manipulation were a shift from President George W. Bush’s team, which stopped short of using the term in criticizing China’s exchange-rate management. “The signal this sends is not good” for ties between the two nations, said Charles Freeman, a fellow at the Center for Strategic and International Studies and former top trade negotiator for China at the U.S. Trade Representative’s office. “It opens a Pandora’s box. We need the Chinese to hold onto their Treasury and agency debt.”

Today's Economic Events