The Yen strengthens against Dollar as the U.S economic slump continues

The Japanese yen rose against the dollar after Lawrence Summers said the U.S. economy will keep shrinking and as the spread of swine flu boosted demand for Japan’s currency as a refuge from the recession. The euro fell the most in a week against the dollar and the yen on speculation the European Central Bank will lower interest rates at its meeting next month and signal it will take additional measures to keep down borrowing costs. The euro fell the most in a week against the dollar and the yen on speculation the European Central Bank will lower interest rates at its meeting next month and signal it will take additional measures to keep down borrowing costs. “The market is returning to pessimism-driven trading,” said Daisuke Uno, chief strategist in Tokyo at Sumitomo Mitsui Banking Corp “This means that the yen may be bought.” The USD/JPY is currently trading at 96.80 as of 8:40am, London Time.

Sterling fell on Friday against the euro after data showed the UK economy's fall in the first quarter was its fastest in 30 years, casting doubt on the government's economic outlook. Britain's first-quarter gross domestic product fell 4.1 percent year-on-year, the biggest annual drop since the end of 1980. Analysts had expected a 3.8 percent contraction. Such a weak GDP reading overshadowed better-than-expected retail sales data for March. Sterling also came under pressure after The Telegraph newspaper reported ratings agencies were concerned about Britain's rising debt levels, after the government earlier in the week said the national debt would reach 1.4 trillion pounds in the next five years. "There's a lot weighing on sterling, not least the budget and fallout from concerns about the amount of gilt issuance," said David Tinsley, economist at National Australia Bank in London. The GBP/USD is currently trading at $1.4560 as of 8:58am, London Time.

The Australian and New Zealand dollars dropped for the first time in three days on speculation the spread of swine flu from Mexico will hurt tourism and deepen the global recession, spurring investors to sell riskier assets. New Zealand’s dollar weakened versus the yen and the greenback as economists estimate policy makers will lower the benchmark rate on April 30 to 2.5 percent from 3 percent to counter the nation’s worst economic slump in three decades. The Australian and New Zealand currencies also fell after Lawrence Summers said the U.S. economy will shrink “for some time to come” and Japan’s government lowered output forecasts. The AUD/USD is currently trading at 0.7140 as of 9:10am, London Time.

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