Wednesday November 26, 2008 - 10:14:25 GMT
Share This Story
Reuters - www.reuters.com
FOREX NEWS-Yen up as Fed stimulus weighed; EU plan awaited
* Yen supported on risk aversion, high-yielders slide
* China cuts interest rates by 108 bps, yen pares gains
* Fed rescue plan raises concerns about U.S. balance sheet
By Naomi Tajitsu
LONDON, Nov 26 (Reuters) - The yen rose against the euro and
higher-yielding currencies on Wednesday, with struggling
European shares helping to spur risk aversion ahead of expected
economic stimulus measures by the European Union.
The dollar was on the back foot against the yen after an
$800 billion U.S. plan to rescue its debt market raised concerns
about the health of the nation's balance sheet.
The yen pared some gains after China surprised markets with
its largest interest rate cut since 1997, but remained supported
against the dollar and the euro.
Analysts said the Federal Reserve's plan unveiled on Tuesday
to buy up mortgage-related debt and support the consumer debt
securities market was another decisive act but it did little to
boost the dollar on worries it may exhaust U.S. coffers.
"It's obviously positive for some aspects of the economy,
but people are starting to worry about balance sheet risks ...
In general, problems on the U.S. economic front haven't changed
at all," said Geoffrey Yu, currency strategist at UBS in London.
The euro <EURJPY=R> dropped 0.7 percent to 123.55 yen, while
the dollar <JPY=> slipped 0.2 percent to 95.02 yen.
The yen pared some gains after China cut its one-year
deposit and lending rates by 108 basis points [nOSL009022],
helping to pull the euro off a session low of 122.84 yen.
"The China rate cut reinforces the notion of global
coordinated action to counter the downside risks to the global
economy, which will erode the attraction of the yen safe haven
quality," said Lena Komileva, G7 market economist at Tullett
The single currency <EUR=> slipped half a percent against
the dollar at $1.2958.
Risk aversion stung high-yielding currencies like the
Australian dollar, which fell 0.6 percent against the U.S.
dollar <AUD=> and tumbled as much as around 0.8 percent against
the yen <AUDJPY=R>.
High-yielders have come under particular pressure against
the yen, as investors continue to unwind carry trades in which
they used the low-yielding Japanese currency to purchase assets
in currencies with higher yields.
The EU will announce a plan later to stimulate the bloc's
economy, which French Economy Minister Christine Lagarde said
may amount to more than the expected 130 billion euros
Analysts doubted it would do much to boost the euro, which
has suffered as the euro zone has slipped into recession.
"Given it has been so long flagged and has felt like a
lengthy process to even get to this point, it is questionable
whether its delivery will indeed restore confidence," analysts
at Calyon said in a research note.
Economic weakness has raised calls for the European Central
Bank to continue cutting interest rates. Data on Wednesday
showed falling consumer prices in German states, indicating that
falling inflation is paving the way for more cuts.
ECB Governing Council member Axel Weber, often seen as one
of the central bank's most hawkish figures, said in a newspaper
interview published late on Tuesday that the bank had room to
further lower rates, after cutting them by 50 basis points to
3.25 percent earlier in the month [ID:nLQ715909].
Investors will also await a raft of U.S economic data later
in the day, including a weekly reading of the mortgage market
and jobless claims and monthly figures on personal income,
spending, durable goods and new home sales.
(Additional reporting by Jessica Mortimer, editing by Mike
Forex Trading News
Daily Forex Market News
Forex news reports can be found on the forex research
headlines page below. Here you will find real-time forex market news reports
provided by respected contributors of currency trading information. Daily forex
market news, weekly forex research and monthly forex news features can be found
Real-time forex market news reports and features providing
other currency trading information can be accessed by clicking on any of the
headlines below. At the top of the forex blog page you will find the latest
forex trading information. Scroll down the page if you are looking for less
recent currency trading information. Scroll to the bottom of fx blog headlines
and click on the link for past reports on forex. Currency world news reports
from previous years can be found on the left sidebar under "FX Archives."