(Adds details, updates prices, changes byline)
By Lucia Mutikani
NEW YORK, Jan 11 (Reuters) - The yen rose across the board
on Friday as global equity markets sagged on renewed fears of
further subprime mortgage-related writedowns in the U.S.
financial sector, reducing investors' appetite for risk.
A New York Times report that Merrill Lynch <MER.N> was
expected to suffer $15 billion in losses from soured mortgage
investments left investors reluctant to hold relatively risky
carry trades in which cheap borrowing in the yen and Swiss
franc funds purchases of high-yielding currencies.
Low-yielding currencies tend to attract flows during
periods of uncertainty as the low interest rates reflect the
capital surplus of their respective countries.
"The general theme is towards risk aversion, we will see
the yen and the Swiss franc outperform. There is still a fair
bit of financial market anxiety out there," said Shaun Osborne,
chief currency strategist at TD Securities in Toronto.
"The news on Merrill Lynch suggests to people that we
haven't found the bottom yet (from the subprime mortgage
fallout)."
In afternoon New York trade, the dollar was down 0.4
percent at 108.88 yen <JPY=>, after dipping to a session low of
108.64 yen. The euro traded down 0.6 percent at 161.07 yen
<EURJPY=>, recovering from an intraday low of 160.65 yen.
The Swiss franc rallied to 1-1/2-month highs versus the
dollar <CHF=> and the highest since late August against the
euro <EURCHF=>, though it subsequently retreated a little. The
dollar was last down 0.2 percent at 1.1008 Swiss francs, while
the euro fell 0.3 percent to 1.6284 Swiss francs.
U.S. stocks fell sharply, while European shares were also
down, with investors convinced that the worst from the U.S.
subprime crisis was yet to come. The yen at times has been
tightly correlated to equity markets as investors tend to price
their risk perceptions in those markets.
"Obviously, there is still considerable concern and worry
in the market about the extent of subprime mortgage exposure by
U.S. financials. The news on Merrill Lynch showed there is
still continued distress in this sector," Greg Salvaggio,
senior vice president of capital markets at Tempus Consulting
in Washington.
The dollar regained some of its poise against the euro
after Thursday's tumble following Federal Reserve Chairman Ben
Bernanke's blunt comments on the economy that suggested an
aggressive half-percentage point interest rate cut at its Jan.
29-30 policy meeting.
The euro was down 0.1 percent at $1.4793 <EUR=>.
The rate futures market now reflects expectations of a
half-point cut in the overnight target fed funds rate to 3.75
percent, and also a 38 percent chance the Fed could lower rates
by three quarters of a point.
The euro, meanwhile, rose to a record high versus sterling
<EURGBP=> at 75.86 pence. It last traded at 75.59 pence, up 0.2
percent on the day.
Sterling dipped below $1.95 to a 10-month low against the
dollar <GBP=> as weak industrial output data confirmed investor
expectations that the Bank of England would cut rates next
month after leaving them at 5.50 percent on Thursday.
The pound was last at $1.9562, down 0.3 percent.
(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by
James Dalgleish)
