The dollar and yen gained against other major currencies on Tuesday, as risk aversion heightened on renewed concerns about the U.S. banking sector while fears about an outbreak of swine flu also weighed on sentiment. The Japanese currency hit a seven-week high against the euro and a one-month high against the dollar after the Wall Street Journal reported regulators have told Citigroup (C.N) and Bank of America (BAC.N) they may need to raise more capital based on early results of government stress tests on banks' ability to withstand the economic crisis [ID:nBNG118035]. U.S. stock futures pointed to a lower opening [ID:nN28294706], prompting investors to seek the perceived safety of the dollar and yen, also due to fears about swine flu as the World Health Organization lifted its pandemic alert to phase 4 from phase 3 though it did not recommend any travel restrictions or border closures. [ID:nLS665886]. "The Wall Street Journal is reporting that Bank of America and Citi are two of the banks that will be required to raise capital due to the results of the stress tests; and that in BoA's case the capital shortfall is in the billions of dollars," said Camilla Sutton, currency strategist at Scotia Capital in Toronto in a note to clients. "This, combined with concerns over swine flu, has put downward pressure on equity markets and given a lift to both the dollar and yen." In early New York trade, the dollar fell 0.4 percent against the yen to 96.24 yen , after falling as low as 95.63 yen, according to Reuters data. The euro lost 0.6 percent against the Japanese currency to 125.13 yen , having earlier hit a seven-week low around 124.38 yen on EBS trading systems. The euro was down 0.1 percent against the dollar at $1.3011 YEN GAINS The yen gained also as hedging by Japanese exporters surged on Tuesday ahead of Japan's "Golden Week" string of national holidays from Wednesday through May 7, analysts said. Japanese market players were selling dollar/yen on risks of further downside before the U.S. stress test results, traders said. "Our order book shows greater exporter activity today," Bank of Tokyo-Mitsubishi UFJ said in a note.

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