The Dollar and the Yen both gain as investors look for safety while economic rec

The greenback and the Yen both gained against the euro on speculation European finance ministers will today reiterate the global recession is far from over, increasing demand for the safety of the U.S. and Japanese currencies. Euro-zone’s economic activity this year “is likely to remain weak, but should decline less strongly than was the case in the first quarter,” European Central Bank President Jean-Claude Trichet said July 2nd, while policy makers left the benchmark rate at a record low of 1%. “Equity markets are continuing the decline started at the end of last week, while the VIX Index is also starting to rebound,” analysts led by Hans-Guenter Redeker, London-based global head of foreign-exchange strategy at BNP Paribas SA, wrote in a client note yesterday. “The yen is the major beneficiary of the current shift in market sentiment.” The EUR/JPY is currently trading at 132.45 as of 8:47am, London Time.

The British Pound fell against the dollar, after the British Chambers of Commerce recommended the Bank of England expand its asset purchase program to revive the economy. The Sterling also weakened against the yen, euro and Swiss franc after the Chambers of Commerce said an economic recovery “is not guaranteed,” This “may weigh on the pound,” a team of analysts at Royal Bank of Scotland Group Plc wrote in a research report today. The Bank of England is likely to extend quantitative easing through to its quarterly August inflation report on Aug. 12, RBS said. In other news the ECB expects the Bank of England to join its stock and bond settlement project and bring down costs for investors even further, European Central Bank Executive Board member Gertrude Tumpel-Gugerell said on Monday. The GBP/USD is currently trading at $1.6188 as of 9:04am, London Time.

The world economy is stabilizing as China gains pace and the U.S. economy possibly nears a turning point, Australia's central bank said on Tuesday, although markets are still struggled to shake off doubts about the speed of any recovery. Last week's U.S. jobs report fuelled fears that further job losses could sour the consumer mood and stall any recovery, forcing stock markets lower. The World Bank, in a letter to Group of Eight nations due to meet this week, said interventions by central banks and governments appeared to have "broken the fall in the global economy," but 2009 remained a dangerous year. The EUR/USD is currently trading at $1.3920 as of 9:15am, London Time.

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