Yen Rises as Stocks Fall on Concern U.S. Rescue Plan Will Fail

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The yen rose against the euro and the dollar as Asian stocks slumped on concern the U.S. government’s bank-rescue plan will fail to revive lending, boosting demand for Japan’s currency as a haven.

The yen also gained against higher-yielding currencies such as South Korea’s won and Sweden’s krona and the cost of protecting Asia-Pacific bonds from default increased after Treasury Secretary Timothy Geithner failed to provide details on how he will help banks cope with toxic assets. The euro may weaken versus the dollar before a report tomorrow that economists say will show European industrial production dropped the most in almost 23 years.

“The plan is not the quick fix investors were hoping for, so there’s obvious disappointment,” said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. “Risk aversion will probably spur them to seek the relative safety of the dollar and the yen in the near term.”

The yen rose 0.3 percent to 116.54 per euro as of 7:31 a.m. in London after appreciating 1.8 percent yesterday, the first advance in four days. It climbed for a third day against the greenback, rising to 90.10 yen from 90.47. The dollar was little changed at $1.2935 per euro, after gaining 0.7 percent yesterday.

From Bloomberg News.