Friday February 20, 2009 - 11:45:35 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar, yen rise as stocks tumble
* Dollar, yen rise as European stocks tumble to 6-year lows
* Euro pressured on banking and E.Europe concerns
* EZ PMIs hit record lows; UK retail sales data help stg
(Adds quotes, updates prices)
By Jessica Mortimer
LONDON, Feb 20 (Reuters) - The dollar and the yen rose on
Friday as growing global economic and banking sector woes drove
investors into currencies seen as safe havens, while grim euro
zone data added to negative sentiment on the euro.
The euro gave back much of the previous day's gains against
the dollar as worries about damage to western European banks
from struggling economies in eastern Europe sent European stocks
tumbling around 3 percent .FTEU3 to a 6-year low.
A further negative for the euro were surveys showing levels
of both manufacturing and services sector activity in the euro
zone unexpectedly crashed to new lows in February [nOSL009667].
UK data showing an unexpected 0.7 percent monthly rise in
retail sales in January [ID:nONS004074] helped to provide a some
cheer for sterling, however, which pared losses against the
"The dollar is still the best safe haven bet over yield, and
demand for U.S. Treasuries is outstanding," IDEAglobal senior
strategist Maurice Pomery said.
"People were a bit surprised to see UK retail sales were so
good, but euro zone PMIs were just awful," he said.
At 1104 GMT, the euro fell 0.3 percent against the dollar
to $1.2619 <EUR=>, helping the dollar index .DXY to rise 0.3
percent to 87.750. The pound pared losses after the UK data,
however, and was flat on the day at $1.4292.
Against the yen, the dollar fell 0.3 percent to 93.99 yen
<JPY=>, while the euro lost 0.6 percent to 118.62 yen <EURJPY=>.
The yen gained as shares fell, but its rise against the
dollar was capped by anxiety about a deterioration in its
economy and political turmoil which have eroded the currency's
safe haven status.
The Bank of Japan said on Friday that a deterioration in
corporate profits had gathered pace and that economic conditions
were deteriorating rapidly [ID:nTKG004294].
Attention later in the day will turn to the release of U.S.
inflation data at 1330 GMT after figures on Thursday showed a
record number of unemployment claims at nearly 5 million.
In eastern Europe, evidence has been mounting of governments
having trouble finding sources of financing, with the World Bank
warning that the EU's 10 newest member states are especially
hard hit by the world economic crisis [ID:nLK114726].
"The focus on central and eastern Europe and worries that
private funding there is drying up is depressing the euro," BNP
Paribas chief currency strategist Hans Redeker said.
However, traders said a German magazine report saying the
finance ministry is looking at possible rescue measures to help
other euro zone countries facing financial difficulties
[ID:nBAT002718] helped the euro to pare some of its losses.
Without citing sources, the report said Germany was looking
at issuing a "bilateral bond", but the German finance ministry
later dismissed the report [ID:nLK413348].
On Thursday, Chancellor Angela Merkel said Europe's largest
economy stood ready to help eastern European countries,
principally via the IMF, but declined to speculate about aiding
fellow euro zone countries [ID:nLJ86562].
European Central Bank Governing Council member Erkki
Liikanen was quoted as saying in an interview published in a
Finnish daily on Friday that the central bank will not rule out
any measures to stave off the current economic downturn.
(Reporting by Jessica Mortimer; Editing by Victoria Main)
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