Yen strengthens on credit, subprime worries

Story link: Yen strengthens on credit, subprime worries

The yen strengthened on Thursday as investors retreated from risky investments such as carry-trades after broker recommendations were cut on two of the largest US banks, raising concerns that credit market troubles are not yet at an end.

CIBC World Markets cut its rating on Citibank (NYSE: C) from “sector perform” to “sector under perform”, while it dropped Bank of America (NYSE: BAC; TYO: 8648) from “sector outperform” to “sector perform”, seen as a signal that credit market and subprime mortgage market problems are going to be an issue for some time to come.

Also helping the Japanese currency was a report showing that US manufacturing activity slowed in October, nearly to the point of contracting rather than growing.

It was the first time in a week that the yen had gained on the euro, after its biggest one-day decline against the shared currency in six weeks on Wednesday.

At just past 3 p.m. EDT in New York, the yen was trading at ¥166.0055 in relation to the euro, while it was at ¥114.8350 versus the US dollar, at ¥239.2082 against sterling, and at ¥105.3266 in relation to the Australian dollar.

Meanwhile, the pound was up against most major currencies on the theory that the Bank of England will not cut interest rates at least until next year after the Bank’s chief economist said Wednesday that it “cannot afford” to let up on its campaign against inflation.

Sterling was trading at $2.0831 in relation to the US dollar in afternoon trade in New York, while it stood at €1.4410 against the euro.