(Corrects 14th paragraph to read jobs fell in January instead
of December)
By Vivianne Rodrigues
NEW YORK, Feb 4 (Reuters) - The yen weakened broadly on
Monday as a rebound in global equity markets boosted investors'
appetite for higher-yielding assets, while the dollar edged
lower against a basket of major currencies.
The dollar was relatively stable on Monday after being
whipsawed last week by another hefty interest rate cut, weak
growth and jobs figures and a surprisingly robust manufacturing
report.
Mergers speculation lifted global equity markets and
encouraged investors to sell low-yielding currencies such as
the yen for relatively higher-yielding assets in the Australian
dollar and euro.
"Any time we see stocks rebounding, we see carry trades
back in," said Greg Salvaggio, a senior currency trader at
Tempus Consulting in Washington D.C.
In early morning trading in New York, the dollar was up 0.3
percent on the day against the yen at 106.89 yen <JPY=> and the
euro was up 0.45 percent against the Japanese currency to
158.51 yen <EURJPY=R>.
The euro <EUR=> edged up 0.2 percent to $1.4828, coming
back down from a two-month high of $1.4956 on Friday and a
record peak of $1.4966 struck in November.
The dollar index, a measure of the greenback's value
against a basket of six major currencies, inched lower at 75.37
<.DXY>.
After the flood of news from the United States last week,
investors may turn their attention this week to central bank
policy meetings in Europe and Australia.
The Reserve Bank of Australia is expected to raise interest
rates later this week, while the European Central Bank is
expected to keep rates on hold. The Bank of England will likely
lower borrowing costs, although sterling strengthened broadly
on Monday in a snap back from heavy selling on Friday.
"The key events this week will be the rates decisions in
Europe," said Niels From, currency strategist at Dresdner
Kleinwort in Frankfurt. "The market is looking at the rhetoric
from the ECB ... and a rate cut from the Bank of England."
BAD U.S. NEWS PRICED IN?
Stock market moves have been a big driver for currencies,
as investors see equity market performance as a barometer of
risk. Rising stock markets tend to benefit higher-yielding
currencies at the expense of lower-yielding ones.
Japan's Nikkei share average <> settled 2.7 percent
higher. The FTSEurofirst 300 <> index of top European
shares was up 0.2 percent, surrendering early gains of as much
as 1 percent after U.S. stocks opened lower.
The dollar was hit by two hefty interest rate cuts from the
Federal Reserve last month, along with fears of a U.S.
recession and the potential for more U.S. financial firms to
suffer credit losses from problems at bond insurers.
Data last week showed that the economy expanded at a mere
0.6 percent in the fourth quarter, and that jobs were shed in
January for the first time in over four years.
However, some investors argue that the grim U.S. economic
news has now been factored in and according to Fed funds
futures, investors expect at least another 75 basis points of
Fed rate cuts this year to fight off recession.
(Additional reporting by Jamie McGeever in London; Editing by
Tom Hals)
