The Yen rises against the Dollar on concern the U.S rescue plan will fail

The yen rose against the euro and the dollar as Asian stocks slumped on concern the U.S. government’s bank-rescue plan will fail to revive lending, boosting demand for Japan’s currency as a haven. The U.S. Senate voted 61-37 to approve a separate $838 billion economic stimulus package yesterday, clearing the way for negotiations with the House over a compromise plan lawmakers said they want to send to President Barack Obama quickly. Currency movements may be volatile in Asia as a national holiday in Japan reduces liquidity, said Alex Sinton, a senior currency dealer at ANZ National Bank Ltd. in Auckland. “The plan is not the quick fix investors were hoping for, so there’s obvious disappointment,” said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Risk aversion will probably spur them to seek the relative safety of the dollar and the yen in the near term.” The USD/JPY is currently trading at 90.00 as of 8:35am, GMT.

Sterling fell against the dollar on Tuesday, as continued delays to a U.S. bank bail-out plan and stimulus package heightened investor wariness of risk. U.S. President Barack Obama took his case for an $800 billion-plus stimulus package directly to the recession-weary American public on Monday as he urged Congress to approve a final bill before the recession worsened. But investors were spooked by conflicting reports about the U.S. bank bailout and the fate of a "bad bank" to buy distressed assets as part of the rescue package pulling buyers towards the dollar and Japanese yen and away from sterling and other perceived higher-yielding currencies. The GBP/USD is currently trading at $1.4440 as of 8:45am, GMT.

European Central Bank (ECB) Governing Council member Guy Quaden said on Wednesday the ECB was probably ready to cut interest rates further next month. Belgium's central bank, of which he is governor, cut its domestic GDP forecast for 2009 to a contraction of 1.9 percent from a previous projection of a 0.2 percent fall. Credit Suisse Switzerland's second-largest bank posted a worse-than-expected fourth-quarter net loss of $5.2 billion, taking it to its biggest-ever annual loss, due to a poor trading performance and restructuring charges. Credit Suisse said it had a made a "strong start" to 2009 and all its divisions were showing a pretax profit in the year to date. The EUR/USD is currently trading at $1.2960 as of 8:50am, GMT.

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