Yen stronger as US bailout plans change

Story link: Yen stronger as US bailout plans change

The Japanese yen gained on the euro and other currencies Wednesday on a mid-course change in US bailout plans, as announced by US Treasury Secretary Henry Paulson.

The Treasury is abandoning plans to use the $700 billion in bailout money approved by Congress to buy up bad assets and instead will use the money to buy into banks and encourage them to use the money to return to normal lending as well as to help take the pressure off consumer credit in the US.

At nearly noon in New York the yen traded at ¥95.24 to the US dollar and at ¥119.5737 to the euro, while it also gained against the higher-yielding Brazilian real to ¥41.808 and versus the South African rand to ¥9.1649 on the expectation that investors will abandon carry trades.

Meanwhile, the pound weakened versus the euro and the US dollar on comments from Bank of England governor Mervyn King which indicate that more interest rate cuts are in the cards in the UK.

Mr. King said that the UK economy will continue to contract through most of 2009 and that inflation will be below the government’s 2 percent target.

In addition, the Office of National Statistics reported that jobless claims in the UK jumped by 36,500 in October to 980,900 in October, the 9th consecutive month of increases.

The pound traded at 83.68p to the euro in midday trade in New York while it took $1.5003 to buy a pound, putting the UK currency in a slightly better position than it had been earlier in the session.