Yen, Swiss franc stronger on credit fears

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The yen and the Swiss franc both strengthened Thursday on speculation that concerns about losses related to the credit crisis will cut demand for purchases of higher-yielding currencies that are typically financed by lower-yielding currencies such as the yen and the franc.

In late morning trade in New York the yen traded at ¥161.1536 to the euro, at ¥108.3350 to the US dollar and at ¥95.1723 to the Australian dollar, while the Swiss franc was at SFr1.0860 to the greenback and at SFr1.6154 to the shared currency.

Meanwhile, the US dollar declined versus the euro on concerns that there will be more write downs among financial firms and on fears that new gains in oil prices will further hurt the US economy.

Also having a negative impact on the dollar was the latest data from the Philadelphia Federal Reserve, showing its general economic index at minus 12.7 in August, from minus 16.3 in July, indicating that manufacturing in the region remained in contraction for the ninth month in a row.

At shortly before noon in New York, the dollar traded at $1.4875 to the euro.

The pound also weakened versus the shared currency after the UK Office of National Statistics reported that UK retail sales were up just 0.8 percent in July, the smallest monthly gain over the same period in a previous year since early 2006.

Additionally, Deutsche Bank (FWB: DBK; NYSE: DB) forecast that the Bank of England will cut interest rates by a full percentage point in 2009.

At late morning in New York the pound traded at 79.25p to the euro while it took $1.8755 to buy a pound.

The Australian and New Zealand dollars both gained on the greenback as commodities prices rose, with the Aussie worth 87.85 cents US and the kiwi at 71.76 cents US.

Commodities make up 60 percent of Australia’s exports and 70 percent of New Zealand’s overseas sales.

The Canadian dollar also benefited from gains in oil prices, with the loonie at C$1.0461 to its US counterpart in late morning trade in New York.