RTRS; Yen gains broadly on global economic worries
By Satomi Noguchi
TOKYO (Reuters) - The yen gained broadly on Wednesday on renewed investor risk aversion, after U.S. stocks and commodities fell on fears of a sharp slowdown in economic activity due to the credit crunch.
U.S. stock futures fell more than 1 percent in early Asian trade, cooling sentiment that had been boosted after aggressive bank rescue measures by global authorities.
"We are in a phase of recovering confidence about banking sector, but the market focus is shifting to the health of global economy," said Hideaki Inoue, chief manager of forex trading at Mitsubishi UFJ Trust Bank.
The euro fell against the yen and the dollar as hedge funds sold the single currency after data from Germany showed a bigger-than-expected slide in investor sentiment in October, suggesting the euro zone's top economy may be in for a prolonged slump.
The euro fell 0.7 percent against the yen to 138.12 and dropped 0.4 percent against the dollar to $1.3560.
The dollar fell 0.5 percent from late New York trade on Tuesday to 101.57 yen, retreating from the previous day's high above 103 yen.
The yen is one of the biggest beneficiaries when investors demand safety and unwind carry trades, in which the low-yielding Japanese currency is used to fund investments in higher-yielding currencies and riskier assets.
Panic over the global banking system receded after short-term interest rates for dollars eased in response to the U.S. announcement that it would inject $250 billion into banks, including the country's nine largest.
The action followed similar pledges in Britain, France and Germany.
But the overall state of the market remained fragile, making prices very volatile.
"The yen purchases from hedge funds seem a bit forced. It may not last much longer," said a trader at a Japanese bank.
