Yen stronger on flight from risk

Story link: Yen stronger on flight from risk

The Japanese yen strengthened Wednesday as demand of higher-yielding currencies declined as it looked like interest rates in places like Australia and New Zealand are set to decline after major declines in commodities prices.

Investors were also scared away from risky carry trades by new data showing that Japan could be about to enter a recession.

At just before noon in New York, the yen traded at ¥108.61 to the US dollar and at ¥161.655 to the euro while it was at ¥94.154 to the Australian dollar and at ¥75.63 to the New Zealand dollar.

The greenback, meanwhile, was stronger in relation to the euro, trading at $1.4884 to the shared currency on a gain of 1.9 percent at an annualized rate in the US gross domestic product.

Gains for the dollar came even though the Commerce Department reported that US retail sales were down 0.1 percent in July, the first declines since February, even as taxpayers received tax rebate checks as part of a government plan to stimulate the economy.

The good news from the Commerce Department report was that if it were not for a big decline in automobile sales, retail sales would have been up 0.4 percent in the month.

The pound weakened again, for the ninth consecutive session, on new data showing unemployment up in the UK and on a cut in the Bank of England’s growth forecast.

The Bank cut its forecast for growth in the first quarter of 2009 from 1 percent to just 0.1 percent and said that inflation could top 5 percent before beginning to drop back.

At midday in New York the pound traded at 79.71p to the euro while it took $1.8672 to buy a pound.

The South African rand was weaker ahead of Thursday’s interest rate decision by the South African Reserve Bank on predictions that the Bank will hold rates steady at 12 percent as well as on a government report that said retail sales in South Africa were down 2.6 percent in June from the same month last year.

The rand traded at $7.8985 to the US dollar in midday trade in New York while it was at $11.767 to the euro.