Thursday November 27, 2008 - 11:34:26 GMT
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Reuters - www.reuters.com
FOREX NEWS-Yen gains on econ, geopolitical fears, repatriation
* Yen gains as global recession fears keep investors on edge
* Mumbai attacks add to risk aversion
* Market quiet due to U.S. Thanksgiving holiday
* Dollar dips vs euro; U.S. balance sheet concerns weigh
(Recasts, changes byline, adds quotes, previous TOKYO)
By Jessica Mortimer
LONDON, Nov 27 (Reuters) - The yen gained against the dollar
and euro on Thursday as market worries about the cost of fiscal
stimulus packages and how far they could succeed in fending off
a global recession kept the low-yielding currency supported.
The dollar dipped broadly as worries over the weak U.S.
economy and the impact of these measures on the nation's balance
sheet weighed, though currencies were confined to tight ranges
and liquidity was lighter than usual due to the U.S.
The attacks in Mumbai overnight which claimed over 100 lives
heightened geopolitical fears, feeding into risk-reduction
trades which benefitted the yen. [ID:nLR612199]
Traders also cited talk of repatriation flows from Japanese
life insurers, giving a boost to the Japanese currency.
"The underlying conditions are still conducive for
lower-yielding currencies to outperform," BTM-UFJ currency
analyst Lee Hardman said.
"Clearly the global economy is heading for a very sharp
recession and the yen is well placed to gain," he said.
CMC Markets chief market strategist Ashraf Laidi said the
events in Mumbai earlier had an impact on the yen.
"The Japanese yen began to creep higher against all
currencies during the Thursday Asian session as the crisis
unfolded into hostage standoffs in several areas in Mumbai and
the death toll surpassed the 100 mark," he said in a note to
At 0910 GMT, the dollar fell 0.4 percent against the yen
<JPY=> to 95.17 while the euro dropped 0.2 percent to 122.98
The euro was up 0.2 percent against the dollar <EUR=> at
U.S. FUNDING CONCERNS
Markets continue to digest Tuesday's $800 billion stimulus
plan in the U.S. to support mortgage and other debt markets, as
well as Europe's plan for a 200 billion euro package announced
The yield on 10-year U.S. Treasury bonds fell on Wednesday
below 3 percent to their lowest in half a century after another
raft of dismal economic reports drew investor into bonds.
Data on Wednesday showed U.S. consumer spending in October
posted its biggest drop in more than seven years, consumer
confidence fell to a 28-year low, durable goods orders plunged
and the Chicago purchasing managers' index hit its lowest level
But European shares .FTEU3 rose 1.5 percent in early
trade, following Wall Street and Asian markets overnight. The
optimism from equity markets on the global fiscal and monetary
steps to steer economies through the current storm failed to
feed through into currency markets, however.
Investors remained risk averse, with higher-yielding
currencies such as the Australian and New Zealand dollars coming
Although deleveraging and repatriation flows have been
providing support for the dollar recently, there are worries
over the medium-term outlook for the currency given the very
aggressive U.S. fiscal expansion.
"The potential deterioration in the U.S. fiscal position is
increasing concern over the risks for the dollar and the yen is
increasingly the safe-haven currency of choice," BTM-UFJ's
(Reporting by Jessica Mortimer; Editing by Ruth Pitchford)
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