The Dollar and the Yen gain as stocks declines and investors stay away from high

The yen and the dollar strengthened against higher-yielding currencies as Asian stocks extended a worldwide slump in equities, spurring demand for safer assets. The yen gained versus 15 of the 16 most-traded currencies after European Central Bank council member Axel Weber warned against “exaggerating” recent signals the economy is stabilizing. Japan’s currency also rose to an eight-week high versus the dollar on concern General Motors Corp., the biggest U.S. automaker, is moving closer to bankruptcy. “We are seeing risk aversion across the board,” said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Group. “The market is becoming more vulnerable to negative news and the sharp fall in equities is causing a sell off” in higher-yielding currencies. The USD/JPY is currently trading at 95.45 as of 8:50am, London time.

Sterling slipped on Friday, after a string of figures showing ongoing weakness in the euro zone economy dented demand for currencies perceived to be high-risk, including the pound. Data showing sharp contractions in euro zone countries including Germany, France and Italy put selling pressure on the euro against the dollar, which in turn took the pound lower against the U.S. currency. The pound was on track to end the week lower, reversing a climb from the previous two weeks as risk demand dwindles on the view that recent optimism that the global economy would soon recovery which had boosted stock markets may have been premature. "It's a risk-off day today ... The (euro zone) output numbers are disappointing, so people are very careful about putting risk back on," said Geoffrey Yu, currency strategist at UBS in London. The GBP/USD is currently trading at $1.5195 as of 8:55am, London Time.

The European Central Bank's current efforts to boost the euro-zone economy go far enough unless the situation deteriorates markedly, ECB Governing Council member Axel Weber was quoted on Monday as saying. In an interview with the Financial Times Deutschland, Weber backed the ECB's moves to cut its main interest rate to 1 percent and buy about 60 billion euros worth of covered bonds. Some of the ECB's 22 policymakers have suggested the ECB could go further, but Weber's comments made it clear he sees no need for expansion at the moment even though he warned against taking an overly optimistic view of the recovery. "Unless things get noticeably worse, in my view, the package of measures decided until now is sufficient," he was quoted as saying when asked if ECB's asset purchases would stop at covered bonds. The EUR/USD is currently trading at $1.3460 as of 9:15am, London Time.

Today's Economic Events