🐂 Not all bull runs are created equal. November’s AI picks include 5 stocks up +20% eachUnlock Stocks

REFILE-FOREX-Yen gains, suffering stocks cut risk demand

Published 04/08/2009, 07:20 AM
Updated 04/08/2009, 07:24 AM
EUR/USD
-

(corrects Fed mins release to Wed from Tues in 15th paragraph)

* Euro falls broadly as European shares stumble

* Yen up, corporate earnings concerns sap risk appetite

* German industrial orders data due at 1000 GMT

(Adds comments, updates throughout; previous TOKYO)

By Naomi Tajitsu

LONDON, April 8 (Reuters) - The yen climbed broadly while the euro stumbled on Wednesday, as concerns that corporate earnings may show the global economy remains very weak stung shares and cut demand for currencies perceived to be a higher risk.

Lower European shares helped to push the euro down against the dollar and the yen, which tend to benefit from heightened risk aversion. Comments from Dallas Federal Reserve President Richard Fisher that the euro faced even more problems than the dollar also hit the common currency.

Traders awaited data on German industrial orders due at 1000 GMT.

Risk appetite was hit after a weak earnings report from aluminium group Alcoa raised concerns that other firms, due to state earnings later in the month, may also show poor performance in the first quarter.

"We're seeing an ongoing correction in the sharp increase in risk appetite from last week," said Carl Hammer, currency strategist at SEB Merchant Bank in Stockholm.

Higher-risk currencies including the euro and sterling have retreated after they had rallied on optimism that stimulus efforts would eventually filter through the global economy, which had boosted stock markets.

By 0746 GMT, the euro traded 0.5 percent lower at $1.3190, having fallen around 2.5 percent so far this week.

A 1.0 percent fall in European shares helped to keep selling pressure on the euro, which has retreated from a climb to nearly $1.36 at the start of the week.

Against the yen, the common European currency was down 1.3 percent at 131.55 yen.

The dollar was higher against the euro on its perceived safety, although its was lower against the yen.

Risk aversion grew after Alcoa began the U.S. reporting season with a quarterly loss and a source said General Motors Corp was in intense preparations for bankruptcy.

The dollar fell 0.8 percent to 99.65 yen. The Japanese currency continued its rebound, breaking through the key 100 yen level against the dollar as the U.S. currency pulled further away from a six-month high of 101.45 yen hit earlier in the week.

The U.S. and Japanese currencies are likely to keep drawing demand as investors stay away from higher-yielding currencies such as the Aussie, dealers said. The yen rallied against sterling and the Australian and New Zealand dollars, which each fell roughly 1.5 percent against the Japanese currency.

DATA, MINUTES AHEAD

In a speech in Tokyo on Wednesday, the Fed's Fisher said the U.S. economy was grim, while adding that the problems facing the euro were "perhaps even more substantial" than those of the dollar.

Fisher, who is not a voting member of the Fed's policy-setting committee this year, also said that he would not comment on whether the dollar's recent climb would be short-lived.

Later on Wednesday the Fed will release minutes from its policy meeting in March, when it announced it would start buying longer-dated U.S. Treasuries as part of quantitative easing. The Bank of England starts a two-day policy meeting on Wednesday.

German industrial orders are expected to have fallen 3.0 percent in February, following an 8.0 percent tumble in the previous month.

Analysts said that a combination of a weak reading and the slide in share prices may spell more weakness for the euro.

"If risk is high and equities subdued, another slump in factory demand could prove sufficient to push EUR/USD, with a break below $1.3140 signalling a move lower to $1.3000," analysts at Calyon wrote in a research note.

Traders said Ireland's second emergency budget in six months was also weighing on the euro, highlighting strains in the euro zone. Ireland unveiled on Tuesday an emergency budget including harsh spending cuts and tax increases, and it is expected to face a significant increase in gross national debt to finance a new agency to buy soured bank loans.

(Reporting by Naomi Tajitsu, editing by David Stamp)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.