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FOREX-Dollar steady vs yen, eyes on fate of "Big Three"

Published 12/07/2008, 07:55 PM
Updated 12/07/2008, 08:00 PM

* Dollar steady vs yen, off Friday's 6-wk low near Y91.60

* Bleak jobs data hurt dollar, but US stock rally supports

* Focus on equities, fate of "The Big Three" U.S. carmakers

By Masayuki Kitano

TOKYO, Dec 8 (Reuters) - The dollar was steady against the yen on Monday, staying above six-week lows hit late last week, with traders focusing on moves in equities and the fate of U.S. "Big Three" automakers for direction clues.

The dollar fell to 91.58 yen on trading platform EBS on Friday after data showed that U.S. payrolls fell by 533,000 in Nov, the biggest monthly drop in 34 years.

But the dollar and higher-yielding currencies later rose against the yen as U.S. shares rallied, with investors betting that Friday's drop in oil prices to their lowest in nearly four years would support U.S. consumer spending.

Rises in equities are viewed as a sign of a recovery in investors' risk appetite and can curb demand for the yen, which tends to rise when risk-taking declines and carry trades are unwound.

"There is no question that the numbers were very bad," said Takahide Nagasaki, chief foreign exchange strategist for Daiwa Securities SMBC, referring to the U.S. jobs data.

But with that major U.S. indicator out of the way, and U.S. lawmakers trying to finalise details of a bailout for "The Big Three" U.S. automakers, the risks of sharp declines in the dollar may be declining in the near term, Nagasaki said.

The dollar was steady from late U.S. trading on Friday at 92.90 yen.

The dollar fell to a 13-year low of 90.87 yen in late October, as the yen rallied due to the unwinding of carry trades, which involve selling low-yielding currencies like the yen to invest in higher-yielding currencies and assets.

The euro rose 0.3 percent against the yen to 118.35 yen after falling to as low as 115.87 yen on Friday, the lowest in nearly six weeks.

Against the dollar, the euro rose 0.2 percent to $1.2739.

White House and congressional negotiators sought on Sunday to remove remaining differences over an emergency rescue for the struggling auto industry, a stark symbol of the deepening U.S. economic crisis.

Negotiators tried to forge an agreement in principle to provide "The Big Three" American automakers with at least $15 billion in short-term loans, and supporters of the idea were hoping to win congressional passage this week.

Despite such efforts, however, uncertainty surrounding the U.S. automakers' fate was unlikely to disappear immediately, said a trader for a major Japanese bank.

The trader said the dollar would likely have a hard time rising to levels above 94 yen to 95 yen, and added that a fall in the dollar to below 90 yen by the end of December remained a possibility.

In the stock market, the Nikkei share average rose 1.2 percent in early trade, following Friday's rally on Wall Street.

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