RTRS: Yen gains as weaker stocks raise risk aversion
The yen rose against other major currencies in safe-haven trades on Thursday, with investors avoiding risk as Japanese share prices fell on disappointment over financial rescue plans in the United States.
The yen was well-bid as a lower Nikkei average .N225 prompted Japanese investors returning from a public holiday on Wednesday to seek safety in the currency.
U.S. congressional negotiators reached a deal on Wednesday on $789 billion in emergency spending and tax cuts aimed at pulling the economy out of a deepening recession, and voting on it could take place as early as on Thursday.
But the agreement failed to ease investors' caution.
"The stimulus package does not seem to be a market factor any more as it provided no surprises despite high hopes for it," said Satoshi Okagawa, head of the FX forward trading group at Sumitomo Mitsui Banking.
"And even after the plan is finalized it will take half a year or so until the economy is be able to feel its effects," he said.
Financial markets were also disappointed by a separate $2 trillion rescue program for U.S. banks unveiled on Tuesday that was seen lacking details and clarity, especially over how a public-private partnership would buy up bad assets.
"Without details on the U.S. bank bailout plan, currency market players found it difficult to judge how effective it would be. So they are watching how stocks markets are assessing financial plans," said Kwang-ja Kim, deputy general manager at Shinsei Bank.
U.S. stock futures hovered in negative territory and Kim said if Dow futures fall below 7,800 it could spur selling of the dollar and crosses against the yen.
The dollar fell 0.4 percent from late U.S. trading on Wednesday to 90.06 yen.
The Australian dollar climbed 0.3 percent to $0.6575 after data showing employment surprisingly rose in January.
Investors were also shifting their focus to a meeting of Group of Seven finance ministers and central bank governors in Rome on Friday and Saturday.
Finance Minister Shoichi Nakagawa said Japan will act decisively against excessive currency moves but suggested singling out the strong yen in a G7 communique would not work while the damage from the global economic crisis is spreading.
ECB, BOE SEEN LOWERING RATES
European Central Bank policymakers suggested it may resume cutting interest rates next month to help boost the faltering euro zone economy.
