Thursday October 16, 2008 - 12:17:18 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar up vs yen, recession concerns rise
* Dlr up vs yen, recession worries mount
* Risk aversion pushes stocks lower
* Euro/dlr erases losses in volatile trade
(Adds comment, updates throughout)
By Naomi Tajitsu
LONDON, Oct 16 (Reuters) - The dollar rose against the yen
on Thursday on falling share prices as the possibility that the
banking sector may be salvaged did little to quell worries that
the global economy is teetering on the verge of recession.
European shares tumbled roughly 3 percent, taking a cue from
a big drop in Asian markets on growing fears of recession. This
supported the dollar, considered by many as a safe-haven
currency, although gains were limited in whippy trade.
Governments around the world have come to the rescue of
banks battered by the credit crunch, which has stemmed a bout of
panicked selling in high-risk, high-yielding currencies as
interbank lending rates slowly creep lower.
Analysts said investors are now focussing on the massive
toll such bailout plans will likely have on real economies.
"The theme this week is a return to fundamentals," said
James Shugg, international economist at Westpac.
"It looks like we're going to sort out the banking sector.
What people are now realising is that even with that, we're
probably going to see a recession."
Other analysts said with the focus shifting to deteriorating
economic health, erratic current movements would likely continue
as investors determine which currencies had the most to lose
from a recession.
The dollar <JPY=> rose 1.0 percent to 100.65 yen, recovering
from a seven-month low of 97.88 yen touched last week. Earlier
in the day, the pair climbed as high as 100.76 yen.
Against a basket of six major currencies, the U.S. currency
.DXY eased 0.2 percent to 82.089, having climbed as high as
82.840 and hovering in range of 83.191 hit on Friday -- the
highest since June 2007.
The dollar was generally supported even after figures showed
that U.S. retail sales last month dropped the most in more than
three years, while Federal Reserve Chairman Ben Bernanke issued
a dour assessment of the world's biggest economy.
"We know the U.S. economy is very weak and the banking
sector is struggling. But that means as well that U.S. investors
would like to take their assets home," said Hans-Guenter
Redeker, chief forex strategist at BNP Paribas, explaining the
Readings of U.S. consumer prices, industrial production and
jobless claims due later in the day may offer more clues into
how much the economy is slowing, market participants said.
The euro rose 0.4 percent to $1.3513 <EUR=>, having earlier
fallen to $1.3347 and towards a 1-1/2 year low of around $1.3257
hit on Friday. It gained 1.3 percent versus the yen to 136.00
yen <EURJPY=> but was still not far off the three-year lows of
132.25 yen set last Friday.
C.BANKS TO THE RESCUE
Announcements that a Swiss bank was being partly
nationalised and that Hungary had received an emergency loan
from the European Central bank underlined ongoing financial
instability in Europe.
The Swiss franc slipped to its lowest level of the year
against the dollar after the Swiss government said it would take
a near 10 percent stake in UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) as the bank and its
rival Credit Suisse raise funds to help them survive the ongoing
banking turmoil [nLG729815].
The dollar <CHF=> climbed as high as 1.1488 francs, its
strongest since late 2007, but the euro was little changed
against the Swiss currency <EURCHF=> and hovered in sight of a
four-year low hit last week.
Some analysts said the Swissie was supported against the
euro on the belief the move to partly nationalise UBS
strengthened the franc's status as a safe-haven currency.
Meanwhile, the Hungarian forint steadied against the euro
<EURHUF=> after the country's central bank struck a deal with
the ECB to borrow up to 5 billion euros to boost liquidity in
its markets and unfreeze its bond market [nLG552658].
The Swedish crown <EURSEK=> hit a record low to the euro at
10.1450 crowns as the currency was dogged by worries about the
economy given rising import prices and limited room for rates
cuts. Data showing rising unemployment bolstered such concerns.
(Additional reporting by Ian Chua; Editing by Ron Askew)
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