RTRS; FOREX-US dollar, yen up on recession fears; pound tumbles
* Shaky stocks boost risk aversion, helping dollar, yen
* Sterling hits 6-year low vs dollar on BoE forecast, King
* Pound hits record low vs euro
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By Wanfeng Zhou
NEW YORK, Nov 12 (Reuters) - The U.S. dollar and the yen rose on Wednesday, buoyed by safe-haven bids as persistent worries about a severe global economic downturn prompted investors to avoid riskier investments.
Sterling tumbled to a six-year low against the dollar and a record trough against the euro after the Bank of England warned the economy will shrink sharply next year and its governor, Mervyn King, bolstered expectations of aggressive interest rate cuts.
The euro hit a fresh two-week low against the dollar overnight, coming under selling pressure after data showed euro-zone industrial production fell more than expected in September. For details, see [ID:nLC724790].
"We're probably going to continue to see downward pressure on the euro and the pound in particular," said Ronald Simpson, managing director of global currency analysis for Action Economics in Tampa, Florida. News from Europe "just reinforced market expectations that global recession is still in the cards."
In early New York trade, the ICE Futures U.S. dollar index, which tracks the greenback against a basket of six currencies, rose 0.3 percent to 87.322 .DXY.
The euro fell 0.1 percent to $1.2510, well below a session high of $1.2632. It hit a two-week low of $1.2481 earlier in the day, according to Reuters data.
The yen posted gains across the board. The dollar last traded down 1.1 percent at 96.59 yen and the euro fell 1.1 percent to 120.93 yen , after hitting 120.31 yen, the lowest level since October.
"The yen has stayed relatively strong due to its role as a global risk barometer," Simpson said.
Overall, rising risk aversion, a generally weaker tone in equities and global recession fears will likely continue to benefit the greenback, analysts said.
"I continue to look for choppy markets in the weeks and months ahead and for an overall risk averse theme to be the dominant one," said Dustin Reid, senior currency strategist at RBS Global Banking & Markets in Chicago.
"As such I have a difficult time seeing a material U.S. dollar decline from here, especially if the recent theme of weaker equities and a stronger dollar continues to have a high correlation," he added.
