The Wall Street Journal-20080205-Weak Dollar Rises Against Yen

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Weak Dollar Rises Against Yen

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NEW YORK -- The support that higher-yielding currencies received from an overnight increase of risk appetite with a rise in Asian stocks carried through yesterday in New York, despite a turn in U.S. equities.

Risk sentiment stood firm throughout the trading session, leaving major currencies range-bound even though the Dow Jones Industrial Average declined 108.03 points. The dollar stayed weak compared with the euro and British pound, but was higher against the yen, after currency investors switched funds from safer, lower-yielding currencies back into those that pay higher returns.

The euro was additionally supported by expectations that the European Central Bank will remain hawkish after its latest policy meeting ends Thursday.

Meanwhile, the dollar grew against the yen as the market largely shrugged off the disappointing 17,000-job decline in the volatile nonfarm payrolls report Friday compared with an expected 75,000 rise. Support for the dollar also came from the release of U.S. December factory orders, which rose by 2.3% after climbing 1.7% in November.

Yesterday afternoon in New York, the euro was at $1.4827 from $1.4799 late Friday, while the dollar was at 106.74 yen from 106.59 yen. The euro was at 158.26 yen from 157.74 yen late Friday. The British pound was at $1.9738 from $1.9663, while the dollar was at 1.0884 Swiss francs from 1.0890 Swiss francs late Friday.

Currency markets were largely on hold without any first-tier data on which to trade and before the Bank of England and ECB interest-rate announcements later this week.

The pound was lifted from Friday's close amid expectations that the BOE Thursday will cut interest rates more modestly than earlier speculated, likely by a quarter point instead of a half point.

Meanwhile, news of analyst downgrades for American Express Co., Wells Fargo & Co. and Wachovia Corp. contributed to the dollar's standstill against the yen, unable to garner gains typically associated with a rise in risk sentiment. Analysts warned that mounting credit losses will overwhelm the benefit of interest-rate cutting by the Federal Reserve.

UBS cut its ratings to "sell" on American Express, Capital One Financial Corp. and Discover Financial Services, saying higher ratings are inconsistent with its outlook for a consumer-led recession in the first half of the year. The result will be higher unemployment through 2009 and rising losses on credit-card and auto loans, UBS analyst Eric Wasserstrom wrote in a research note.

Elsewhere, the Colombian peso traded at its strongest level since late July against the dollar. Though seen as a riskier bet than other currencies, the recent Fed cuts have currency investors willing to take the bet so as to pick up the needed yield they can't find in dollars.

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Dan Molinski in New York and Laurence Norman in London contributed to this article.