The Dollar and the Yen rise on GM bankruptcy rumours

The yen and the dollar rose against the euro after an Obama administration official said bankruptcy may be the best option for General Motors Corp. and Chrysler LLC, spurring investors to seek the shelter of the two currencies. The yen climbed to the strongest level in almost two weeks versus the euro as Asian stocks ended a five-day rally on concern the global recession will lead to further losses in the financial industry. The greenback advanced for a third day versus the euro on speculation the European Central Bank will cut interest rates to the least since the European currency was introduced in 1999. “There is no doubt that this report on the U.S. carmakers is fueling risk aversion,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA. “The bias is for the yen, followed by the dollar, to be bought.” The EUR/USD is currently trading at $1.3190 as of 8:30am, GMT.

Investors are the most bullish on Australian and New Zealand dollars since 2003, anticipating that spending on commodities will increase as central banks print unprecedented amounts of cash to rescue their economies. The Group of 20 nations’ debt will jump next year to 77 percent of GDP, up 11 points from 2008, the IMF report said. “If you put any more money into the system, you’d have to start burning it,” said New Jersey’s Democratic Governor Jon Corzine, 62, in a March 26 Bloomberg News interview. “We’re getting closer to the zone” where “people feel slightly more comfortable with the economy and stop hiding it under the mattress,” said Corzine, who was chairman and then co-chairman of Goldman, Sachs & Co. from 1994 to 1999. The AUD/USD is currently trading at 0.6780 as of 8:55am, GMT.

Sterling fell to a one-week low against a broadly firmer dollar on Friday, weighed by an unexpected downward revision to UK gross domestic product. Against the euro, however, the pound turned higher as the single currency came under broad pressure after German finance minister Peer Steinbrueck said fiscal irresponsibility in Europe could put the currency's stability and credibility at risk. UK data on Friday showed the economy shrank by 1.6 percent quarter on quarter in the final three months of 2008, revised down from -1.5 percent previously to mark the sharpest decline since 1980. The GBP/USD is currently trading at $1.4145 as of 9:00am, GMT.

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