Tuesday March 13, 2007 - 10:58:35 GMT
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Reuters - www.reuters.com
FOREX NEWS-Continuing risk aversion leads to higher yen
FOREX-Continuing risk aversion leads to higher yen
Tue Mar 13, 2007 6:36am ET31
(Updates price, adds quote, changes byline)
By Simon Falush
LONDON, March 13 (Reuters) - The yen rose against the dollar and euro on Tuesday as jitters about the U.S. mortgage market and caution ahead of key U.S. retail sales data prompted investors to trim exposure to high-yielding currencies.
Concerns about a rising number of defaults in the U.S. subprime mortgage sector and their possible impact on the broader economy triggered buying of low-yielding currencies such as the yen and the Swiss franc from Monday.
U.S. retail sales figures at 1230 GMT could prompt further concerns about the health of the world's biggest economy.
"Investors have a directional view, they are looking for bad news," said Steve Barrow, currency strategist at Bear Stearns.
"Poor (retail) sales figures could lead the (bad news) from the mortgage sub-prime story to spread elsewhere and act as a drag on the economy."
By 1012 GMT the dollar was down 0.2 percent at 117.39 yen, having hit a three-month low of 115.13 last week.
The euro was down 0.4 percent at 154.65 yen , moving further away from February's record high near 160.
It was down 0.1 percent versus the dollar at $1.3175 , trimming earlier losses after an unexpectedly strong ZEW business confidence survey, which came in at 5.8 in March, above the consensus forecast of 3.3.
The data gives further impetus to the ECB to raise interest rates above the current 3.75 percent.
Concerns about the subprime mortgage industry, which lends to borrowers with poor credit histories at high interest rates, have dampened investor appetite for risk.
The riskiest segment of the U.S. lending market has seen rising default rates in recent months, pushing companies such as New Century Financial, the largest independent U.S. subprime mortgage lender, closer to bankruptcy.
Investors are anxious to see how falling prices and slower sales in the housing market may affect the overall economy, as U.S. consumption has been driven by a housing boom.
"Soft U.S. retail figures today may escalate fears that the housing sector is starting to weigh on broader domestic demand," ING said in a note to clients.
U.S. retail sales are expected to have risen 0.3 percent in February. Excluding auto sales, economists also estimate a 0.3 percent rise from the previous month.
Any weaker-than-expected figures could stoke expectations for possible Federal Reserve interest rate cuts from the current 5.25 percent later in the year.
Â© Reuters 2007. All Rights Reserved.
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