Dollar climbs vs sterling, euro
Tokyo, January 26, 2009
The dollar climbed on Monday, moving back near a 23-year high against sterling and a six-week high versus the euro as fears about the global recession and banking sector problems pushed investors away from risk.
Investors were also anticipating moves from the White House to revive banks and draw up a plan to help the world's biggest economy out of a year-long recession.
Lawrence Summers, head of the National Economic Council and President Barack Obama's top economic adviser, admitted on Sunday that more money may be needed to stabilise the financial system.
"What investors are concerned about most is the health of the UK and European banking sectors, and that is hitting European currencies and lifting the dollar, while hopes of the Obama administration helping the U.S. economy remain," said Yasutoshi Nagai, senior economist at Daiwa Securities SMBC.
Sterling fell 1.0 percent versus the dollar to $1.3665 after hitting a 23-year trough of $1.3500 on Friday.
The euro fell as far as $1.2861 and was down 0.3 percent at $1.2934 by early afternoon. The European single currency sank to a six-week trough of $1.2764 on Friday, in the wake of surveys showing the euro zone manufacturing and services sectors contracted in January, albeit at a slightly slower pace.
The pound has tumbled recently on worries about a weak economy as well as concerns over the stumbling British banking sector and the parlous state of government finances.
Activity was subdued in Asia, however, as many financial markets were closed for the Lunar New Year, while Australian markets were shut for a national holiday. Thin volumes made price moves choppy.
The euro edged up 0.2 percent versus the yen from Friday's late US trade to 115.25 yen on Japanese corporate demand. The European single currency hit a seven-year trough of 112.08 yen last week.
Sterling slipped 0.4 percent to 121.88 yen. It struck a record low of 118.80 yen late last week. The pound fell on Friday after data showed the British economy entered a recession at the end of last year for the first time since 1991, contracting at its fastest pace in nearly 30 years.
Sentiment was further dented for sterling after Bank of England Monetary Policy Committee member David Blanchflower was quoted on Sunday as saying British interest rates still had a way to go if they are to follow the United States.
UK rates are currently at a record low of 1.5 percent as the central bank tries to stimulate the economy and prevent a deep recession.
The dollar rose 0.5 percent to 89.20 yen as dealers trimmed short dollar positions against the yen ahead of the Federal Reserve's two-day policy meeting starting the following day. - Reuters