By Eric Burroughs
TOKYO, Jan 7 (Reuters) - The dollar edged up from a six-week
low against the yen on Monday as Japanese investors stepped in to
buy after its slide late last week on poor U.S. jobs data that
bolstered expectations for an aggressive Fed rate cut.
The dollar also staged a slight rebound in Asia trade after
some traders were disappointed the weak payrolls report did not
spark a deeper retreat in the U.S. currency, prompting them to
reverse short positions.
The yen slipped even as Asian stock markets extended their
slide on worries about the U.S. economic outlook, partly from
Japanese importers buying dollars for their commodity needs and
from Japanese investors seeking higher yields, traders said.
Yet traders said a further sell-off in stock markets would
likely spur more unwinding of carry trades in which the
low-yielding yen is used as a cheap source of funds to buy
higher-yielding currencies and riskier assets like equities.
"The market is still adjusting its view of how a U.S.
slowdown is going to affect Asia," said Gerrard Katz, head of
North Asia currency trading at Standard Chartered in Hong Kong.
"As long as Asian stocks are weak, fund managers are buying
U.S. Treasuries and selling positions in a traditional safe-haven
play."
The dollar edged up 0.3 percent from U.S. Friday trade to
108.90 yen <JPY=>, clawing up from a six-week low of 107.90 yen
struck on Friday.
The euro dipped 0.1 percent to $1.4728 <EUR=> after reaching
a five-week high of $1.4825 on Friday, not far from the record
peak of $1.4968 struck in November.
The single European currency gained 0.2 percent to 160.35 yen
<EURJPY=R> but was also near a six-week trough struck last week.
On Monday, Japan's Nikkei average <> was down 1.1
percent following a 4 percent tumble on Friday. Equity markets in
Taiwan <> and Hong Kong <> shed around 3 percent.
MULLING PAYROLLS
The U.S. payrolls report showed an employment rise of just
18,000 in December and the jobless rate posting a surprisingly
big surge to a two-year high of 5.0 percent, stoking fears the
economy is headed for a recession.
Market players believe the Fed is likely to cut rates by a
hefty half-point at its late January meeting to 3.75 percent,
which is usually seen as potentially eroding the attractiveness
of U.S. assets to some foreign investors. A quarter-point rate
cut is seen as virtually certain.
Currency strategists at RBC Capital Markets said the jobs
data stirred doubts that "U.S. consumers will be able to
withstand the onslaught of tighter credit markets, a declining
housing market and looming subprime mortgage refinancing."
Analysts are divided about whether the dollar will extend
last year's sell-off to record lows against the euro in 2008 as
the economy worsens, or whether the Fed's sharp rate cuts will
help improve confidence on the U.S. economy's outlook.
Other central banks in Canada and Britain have followed the
Fed in cutting interest rates.
Sterling edged down to $1.9702 <GBP=D4> from around $1.9735,
weighed down by persistent expectations that UK interest rates
are set to fall significantly from 5.5 percent in 2008. On
Friday, sterling fell as low as $1.9674, the lowest since
mid-August.
A Reuters survey showed late last week that many economists
expect the Bank of England will leave interest rates on hold at
its two-day meeting ending on Thursday, although they say rates
will fall three times this year to 4.75 percent. []
The European Central Bank, which has kept saying that it is
worried about inflationary pressures, will also hold a policy
meeting later this week.
Market players are looking out for comments by ECB President
Jean-Claude Trichet, who holds a news conference following a
meeting of global central bankers in Basel around 1200 GMT.
(Additional reporting by Rika Otsuka; Editing by Michael Watson)
