Haven-related buying boosted the U.S. dollar and the Japanese yen Monday as investors fled equity markets amid renewed fears over the auto sector and indications this week's highly-touted meeting of leaders from the Group of 20 nations won't produce an agreement on additional fiscal stimulus measures.
Asian and Europe stocks tumbled Monday on news the Obama administration had forced the resignation of General Motors Corp. CEO Rick Wagoner and rejected restructuring plans offered by GM and Chrysler. See Asia Markets. Read Europe Markets.
U.S. stock index futures also pointed to a lower opening for Wall Street. See Indications.
Strategists said traders were also paying close attention to reports indicating the G20 isn't likely to produce much in the way of specific measures designed to promote global growth. See full story.
"Today will see further [dollar and yen] strength as investors will price in a higher probability of a G20 failure," wrote strategists at BNP Paribas.
The dollar and yen both continue to find support during periods of financial turmoil, although the relationship between investors' risk appetite and movements in the currencies has diminished somewhat in recent months. Year-end repatriation flows have also helped to underpin the yen, traders noted.
The dollar lost ground to the Japanese currency to trade at 96.61 yen, down from 97.83 yen in North American activity late Friday.
The dollar index , a measure of the greenback against a trade-weighted basket of rival currencies, rose to 85.650 from 85.138.
"Risk aversion and a potential of failure of any significant (growth positive) outcome at the G20 meeting this week are U.S. dollar positives," said Ashley Garvin, a currency strategist at Bank of Scotland, in a research note.
But worries about inflation following the implementation of quantitative-easing measures remains a negative for the currencies of countries that have embarked on such a strategy, including the U.S. dollar and the British pound, he said.
The euro extended losses versus the dollar after the European Commission reported that its monthly gauge of economic sentiment in the 16-nation euro zone dipped to another record low in March.
The euro traded at $1.3171, down from $1.3289 late Friday.
The commission's monthly Economic Sentiment Indicator fell to 64.6 in March from 65.3 in February, marking the lowest level since the survey began in 1985.
The British pound traded at $1.4159, down from $1.4323 late Friday.
The Bank of England on Monday said mortgage approvals rose 38,000 in February from 32,000 in January, marking the highest level in nine months.
