Dollar rises vs yen as global shares rally

NEW YORK - The U.S. dollar climbed against the yen on Friday, as investor’s appetite for risk returned, bolstered by optimism about a U.S. government program to subsidize mortgages for homeowners.

By (Reuters)

Published: Fri 13 Feb 2009, 9:10 PM

Last updated: Sun 5 Apr 2015, 10:22 PM

The news which came out late on Thursday rekindled the market’s appetite for risk, lifting global shares and commodities such as oil. This also fueled a sell-off in the yen and briefly the dollar versus the euro.

“We are still hinging on risk appetite and we are keying off equities. That’s why we’re seeing some selling in the yen against the dollar and other crosses,” said Shaun Osborne, chief currency strategist, at TD Securities in Toronto.

“That story on mortgage subsidy gave equities a lift and there still some carry-over from that.”

Markets welcomed the news that the Obama administration may unveil a broad plan to put a floor under the housing market.

A rising wave of U.S. mortgage delinquencies has saddled the global banking system with big losses that have led banks to recoil from lending, choking economies around the world.

In early New York trading, the dollar rose 0.6 percent to 91.42 yen. The euro was also up against the yen, rising 0.5 percent to 117.37.

The dollar and yen, which tend to fall with increased appetite for risk-taking, also lost ground to higher-yielding currencies ahead of the G7 meeting in Rome and a long weekend in the United States.

The euro fell 0.2 percent against the dollar to $1.2842, erasing earlier gains, weighed down by data showing the euro zone economy in a deeper recession than expected. That boosted pressure for the European Central Bank to cut interest rates next month.

The euro zone economy contracted by 1.5 percent in the fourth quarter, the deepest on record.

Sterling also rallied as investors squared market positions ahead of the weekend on concerns that Group of Seven finance chiefs may discuss the currency’s recent weakness, analysts said.

But the pound came off its highs pressured by sharp falls in UK banking stocks after Lloyds Banking Group unveiled a hefty loss related to its HBOS subsidiary. Lloyds said HBOS lost about 8.5 billion pounds last year, news which sent shares in Lloyds and other UK banks tumbling and pushed the UK’s FTSE share index into the red.

Sterling last traded at $1.4406, up 1.0 percent.

Attention now turns to the G7 meeting in Rome. Analysts said the bleak euro zone GDP figures had also raised concerns that G7 leaders may discuss the pound’s recent weakness against the euro.

“There’s a mixture of the poor GDP data and some short-covering ahead of G7 in the sense that the bad set of euro zone data might put the UK authorities under pressure at G7 to do something about the weaker pound,” said Investec chief economist Philip Shaw.

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