Dollar and yen rally as havens are sought

Dollar and yen rally as havens are sought
By Johanna Kassel
Copyright The Financial Times Limited 2009
Published: May 6 2009 11:32 | Last updated: May 6 2009 11:32
http://www.ft.com/cms/s/0/38cce0ca-3a26-11de-8a2d-00144feabdc0,s01=1.html


The yen and the dollar gained on Wednesday as investors sought safe haven currencies ahead of Thursday’s European Central Bank meeting and the results of stress tests on US banks.

Investors were waiting for any news on possible quantitative easing at the ECB’s monthly interest rate setting meeting.

Confidence was also hit by reports that Bank of America may require as much as $34bn in additional capital.

The dollar gained 0.6 per cent against the yen to Y98.37 and was level with the euro.

The yen rose against the Australian dollar by 0.5 per cent to Y72.86 and 0.1 per cent against the New Zealand dollar to Y57.18.

The pound recovered some poise against the dollar in mid-morning trading after UK service sector data rose for the fifth month in a row. Sterling modestly rose against the dollar to 0.1 per cent to $1.5077 and 0.1 per cent against the euro to £0.8826.

The Asian emerging markets currencies were dragged down by an International Monetary Fund’s report that Asia will not undergo a sustained recovery until the middle of 2010.

Sue Trinh at RBC Capital Markets said: “Risk aversion reigned overnight, with a few factors weighing on sentiment – US equities closed in the red, the IMF’s twice yearly regional outlook for Asia forecast 1.3 per cent growth in 2009 and warned risks to the outlook was tilted to the downside, noting Asia faces a ‘long recovery ahead’.”

The South Korean won, which has strengthened in recent weeks, fell 0.4 per cent against the dollar to Won1272 and 0.9 per cent against the yen to Y12.9242.

The Taiwanese dollar slid 0.4 per cent against the dollar to T$33.158.

Emerging markets were hit especially hard as investors sold off riskier assets.

The South African rand dropped 1.4 per cent against the dollar to R8.5170 after tumbling 1.8 per cent on Tuesday.

In central Europe, the Polish zloty dropped 1.3 per cent against the dollar to 3.3060 zlotys and the Hungarian forint fell 0.9 per cent against the dollar to Ft213.89. The Czech koruna was down 0.4 per cent against the dollar to Kc20.066.