Yen rises in Asia as economic worries grow

February 2, 2009
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, TOKYO, February 2 – The yen climbed in Asian trade on Monday as investors looked for safe havens in the face of mounting worries about the outlook for the global economy.

The euro was under pressure as traders bet that the European Central Bank will cut interest rates soon to boost the ailing eurozone economies.

The dollar slipped to 89.64 yen in Tokyo afternoon trade from 89.95 in New York late Friday. The euro slid to 1.2735 dollars from 1.2800 and to 114.16 yen from 115.15.

Sentiment was still depressed by last week\’s dismal economic data from the United States, Europe and Japan.

The dollar and the yen tend to rise in times of economic uncertainty because they are seen by many investors as less vulnerable to the turmoil.

New data Friday showed the US economy shrank 3.8 percent in the fourth quarter of 2008. Japan\’s factory output plunged a record 9.6 percent in December.

Traders said the market was looking ahead to interest rate decisions on Thursday by the European Central Bank (ECB) and the Bank of England.

ECB chief Jean-Claude Trichet has hinted the bank is likely to put off lowering rates until March, although some traders still see a chance of a cut this week in light of the recent gloomy data.

Unemployment in the eurozone hit a two-year high of 8.0 percent in December, putting pressure on the ECB to slash rates from the current level of 2.0 percent, dealers said.

"While Germany has actively implemented stimulus plans that lifted business sentiment slightly, the wave of financial instability has not subsided," Sumitomo Mitsui Banking Corp. strategist Daisuke Uno said.

He said the ECB needed to act quickly to tackle the economic slump with further rate cuts, which would depress the euro further.

The Bank of England meanwhile has already cut rates to a historic low of 1.5 percent and is expected to lower them by another 50 basis points to 1.0 percent this week.

Markets were also looking ahead to US non-farm payroll data due on Friday, with the US economy feared to have lost about half a million jobs in January.

Against other Asian currencies, the dollar rose to 1.5168 Singapore dollars from 1.5084 on Friday, to 1,390 South Korean won from 1,381 and to 47.63 Philippine pesos from 47.37.

The greenback also advanced to 34.95 Thai baht from 34.93, to 11,725 Indonesian rupiah from 11,375 and to 33.78 Taiwan dollars from 33.59.

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