Tuesday March 31, 2009 - 16:06:31 GMT
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Reuters - www.reuters.com
FOREX NEWS-Dollar at 3-week high vs yen; euro up with stocks
* Yen down sharply as Japan fiscal year comes to an end
* Dollar hits three-week high above 99 yen
* Euro gains vs dollar; European stocks rise 3.4 pct
* G20, ECB meetings in focus
(Updates prices; adds details, comment)
By Steven C. Johnson
NEW YORK, March 31 (Reuters) - The yen fell sharply on
Tuesday as the end of Japan's fiscal year and weak economic
data spurred investors to deploy funds abroad while a stocks
rally lifted the euro against the dollar.
The yen, which rose a day earlier as risk aversion and
year-end pressure prompted Japanese investors to bring money
home, reversed course as traders closed the books on the fiscal
A spike in Japanese unemployment also put pressure on the
currency. For details, see [ID:nSP454873]
The dollar rose 1.8 percent to 99.15 yen, a three-week high
<JPY=>, putting it on track for a 9.4 percent gain in the first
three months of the year, the yen's worst quarter since 2001.
Ahead of a closely-watched G20 meeting in London on
Thursday, data showed the global financial crisis has
devastated Japanese exports and led to a sharp economic
contraction in the fourth quarter, leaving Prime Minister Taro
Aso's government vulnerable to collapse.
"Fiscal year-end had been holding people back from selling
yen. But the fundamentals are absolutely horrendous, there's
policy gridlock, and this lets Japanese investors continue to
invest money abroad in droves," said Samarjit Shankar, global
FX strategy director at The Bank of New York-Mellon in Boston.
The euro also gained on the yen, rising 2.5 percent to
131.63 <EURJPY=>, off Monday's two-month low beneath 127 yen.
The euro rose 0.6 percent to $1.3281 <EUR=> and sterling added
0.6 percent to $1.4343 <GBP=>.
The dollar, lifted by safe-haven flows on Monday, fell as
market pessimism eased a bit. European stocks rose more than 3
percent .FTEU3 and Wall Street clawed back some losses caused
by bankruptcy fears for General Motors (GM.N: Quote, Profile, Research, Stock Buzz) and Chrysler.
Data showing U.S. home prices fell by a record 19 percent
in the year to January cooled some euro gains. [ID:nNYS004965]
G20, ECB IN FOCUS
Analysts said the market was starting to focus on a summit
of Group of 20 leaders of major industrialized and emerging
economies in London on Thursday, with investors hoping for
agreement on measures to revive the global economy.
The G20 is expected to agree to increase funding for the
International Monetary Fund but markets will also watch for any
accord on global fiscal stimulus. Japan announced plans for a
third stimulus plan ahead of the meeting. [ID:nLV377774]
Any failure to reach agreement would cause a spike in risk
aversion, analysts said, with the euro likely to suffer as
attention turns to recent credit rating downgrades to Hungary
and Ireland and a deepening recession in eastern Europe.
Also on Thursday, the European Central Bank is expected to
cut rates half a percentage point to 1 percent and possibly
signal plans for some form of unconventional policy such as
buying bonds to boost the money supply. [ECB/INT]
Data on Tuesday showing euro zone inflation hit a record
low in March from a year ago suggests "the ECB will be forced
to adopt more aggressive measures," Tullet Prebon G7 market
economist Lena Komileva said.
One question the G20 summit is not likely to resolve is
that of the dollar's future as global reserve currency. The
issue has gained traction since China suggested wider use of
the IMF's Special Drawing Rights currency basket.
But World Bank President Robert Zoellick said the dollar
will remain the dominant reserve currency and a strong dollar
is needed to pull the world out of crisis. [ID:nLV346311]
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