The Wall Street Journal-20080112-Investors Grab Low-Yielding Yen- Dollar Gets a Boost Against Euro
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Investors Grab Low-Yielding Yen; Dollar Gets a Boost Against Euro
The yen rose Friday as stock markets around the world fell on subprime-related jitters, leading foreign-exchange investors to sell riskier, higher-yielding currencies and buy Japan's low-yielding yen.
The risk-averse sentiment also allowed the dollar to catch a safe- haven bid that gave the dollar a boost against the euro despite negative U.S. trade data Friday and rising expectations the Federal Reserve will aggressively cut rates later this month.
The U.S. deficit in international trade of goods and services surged to $63.12 billion in November from October's revised $57.77 billion, the Commerce Department said Friday. Economists were forecasting a U.S. deficit of $59.75 billion in November.
"The trade deficit should be overall dollar-negative, but other factors [were] at work, including the dirt out of Wall Street," said Brian Dolan, chief currency strategist at Forex.com, referring to news that financial firms may have more heavy write-downs to report due to the U.S. subprime-mortgage mess.
Friday afternoon, the euro was at $1.4778 from $1.4800 late Thursday. The dollar was at 108.97 yen from 109.47 yen. The euro was at 161.04 yen from 162.01 yen, according to EBS. The pound was at $1.9572 from $1.9625, and the dollar was quoted at 1.1018 Swiss francs from 1.1039 Swiss francs late Thursday.
Currency investors took note of comments Friday by Fed Governor Frederic Mishkin, who said the Fed needs to respond in a "timely, decisive and flexible," manner to financial shocks, echoing remarks made Thursday by Fed Chairman Ben Bernanke.
But Mr. Mishkin's comments weren't much of a detriment to the greenback, and that surprised some analysts given that firm expectations of lower interest rates usually work against a currency since investors will look elsewhere for higher returns.
"The resilience of the dollar is notable," said Marc Chandler, global head of foreign exchange at Brown Brothers Harriman.
