USD, yen stronger on risk aversion

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The US dollar and the yen strengthened Monday as investors avoided risk after Japan’s gross domestic product did not grow as much as had been hoped in the second quarter.

Japan’s GDP added an annualized 3.7 percent in the second quarter, not as much growth as predicted but still an improvement over its 11.7 percent decline in the first quarter.

Meanwhile, the greenback was helped by news that the New York Federal Reserve’s general economic index was at 12.08 in August, up from minus 0.55 in July and its highest reading since November 2007.

Any reading above zero indicates expansion in the region’s manufacturing activity.

Still, the dollar was hurt by another bank failure, this time in Alabama, after four other banks closed last week to bring the number of failed US banks so far this year to 77.

At around 10:30 a.m. in New York, the yen traded at ¥132.9887 to the euro and at ¥94.555 to the US dollar, while the dollar traded at $1.4065 to the euro.

The pound, meanwhile, was lower on a report from Rightmove Plc (LSE: RMV) showing that the average price of a house in the UK dropped 2.2 percent in August, an indication that the recession might not be over there yet.

Mid-morning trade in New York found the pound trading at 86.26p to the euro while it took $1.6305 to buy a pound and the yen traded at ¥154.1741 to the UK currency.

The Canadian dollar weakened on lower oil prices and declines in equities markets, but regained some strength on the news about manufacturing in the New York region to trade at C$1.1093 to the greenback at just past 10:30 a.m. in New York.