By Rika Otsuka
TOKYO, June 3 (Reuters) - The yen rose on Tuesday after a
report that U.S. investment bank Lehman Brothers may raise new
capital, stoking worries about more fallout from the global
credit crisis and prompting investors to avoid risky currency
bets.
The Wall Street Journal reported on Tuesday that U.S.
investment bank Lehman Brothers <LEH.N> may raise $3 billion to
$4 billion in new capital, suggesting the firm could post its
first quarterly loss since going public. []
The news came a day after Standard & Poor's cut its ratings
on Lehman Brothers, Merrill Lynch <MER.N> and Morgan Stanley
<MS.N> and said their outlooks were predominantly negative.
[]
"The market is very cautious about developments with troubled
financial firms," said Hideaki Inoue, chief manager of forex
trading at Mitsubishi UFJ Trust Bank.
"But market players are psychologically better prepared for
bad news compared with what it was like in March when dollar/yen
tumbled as if in freefall below 100 yen."
The yen posted sharp gains the previous day as credit worries
prompted investors to bail out of risky yen carry trades, in
which the low-yielding yen is used to finance purchases of assets
with higher returns elsewhere.
The yen typically gains when global stock markets weaken as
investors cut back on risky positions such as carry trades.
Tokyo's Nikkei share average <> was down 1.8 percent.
The dollar was down 0.3 percent from late U.S. trade at
104.15 yen <JPY=>, moving away from a three-month high of 105.88
yen hit last week.
The dollar slipped against the euro before a speech by
Federal Reserve Chairman Ben Bernanke at 1300 GMT, with investors
looking for clues on the policy outlook while eyeing a potential
interest rate hike later in the year.
Investors are concerned that surging food and oil prices may
sustain inflationary pressure and prompt the Fed to start raising
rates later this year. Such views have helped the dollar to
recover from an all-time low against the euro.
The euro edged up 0.1 percent to $1.5555 <EUR=>. The European
single currency has stayed between the record of about $1.6020
hit in April and the low near $1.5280 struck in May.
"Investors are expected to stay inactive this week, which is
loaded with a series of important events such as the monthly U.S.
jobs report on Friday," said a trader at a Japanese bank. "The
dollar is likely to stay rangebound until Friday."
The euro was down 0.2 percent against the Japanese currency
at 161.98 yen <EURJPY=R>.
Sterling fell to $1.9625 <GBP=>, having tumbled the previous
day on mounting signs of trouble in the British housing and
mortgage market.
British mortgage bank Bradford & Bingley <BB.L> on Monday
issued a stark warning on the state of the UK mortgage market in
the bleakest outlook yet from a British lender, hitting bank
shares across Europe. []
The Australian dollar briefly rose after data showed on
Tuesday that building approvals jumped in April and that the
country's current account deficit for the first quarter was lower
than expected. []
But the Australian dollar retreated to $0.9550 <AUD=D4>,
steady on the day, after the Reserve Bank of Australia (RBA) left
interest rates unchanged at 7.25 percent at its monthly policy
meeting on Tuesday as expected.
The RBA has raised rates four times since August to slow a
booming economy and restrain core inflation, which accelerated to
a 17-year high in the first quarter.
In a brief statement following its monthly policy meeting,
the Australian central bank said demand was moderating and rates
were appropriate for the time being, leading the market to price
in a little less risk of further tightening.
(Additional reporting by Satomi Noguchi; Editing by Hugh Lawson)
