* Dollar rises broadly as equities remain volatile
* Weak stock market sentiment pushes cable to 6-week low
* Yen falls as Japan posts current account deficit for Jan
(Recasts, updates prices, adds quotes, changes byline)
By Nick Olivari
NEW YORK, March 9 (Reuters) - The U.S. dollar rallied
across the board on Monday as global recession fears and
banking sector concerns again sparked risk aversion and sent
investors looking for safe-havens such as the greenback.
U.S. stocks bounced between positive and negative territory
for much of the session in skittish trade, adding to the
dollar's allure.
Currencies have tracked equity markets' performance over
the last few weeks, with the dollar tending to benefit when
stocks fall as investors seek shelter amid fears of a collapse
of banking systems worldwide.
"The dollar seems to be the only safe haven left right now,
with both the yen and Swiss franc under pressure," said Robert
Blake, senior currency strategist at State Street in Boston.
"We're certainly in risk aversion mode and the trade right
now is to buy dollars, which to a large extent reflects huge
repatriation flows to the United States."
Concerns about the outlook for the banking sector
intensified after Lloyds Banking Group <LLOY.L> said over the
weekend that the UK government would take a stake of up to 77
percent in the bank after agreeing to underwrite 260 billion
pounds of risky assets. []. That pushed sterling to
six-week lows against the dollar.
In midafternoon New York trading, the dollar was up 0.5
percent against the yen at 98.83 yen <JPY=> and up 0.7 percent
against the Canadian dollar at C$1.2966 <CAD=>. The Australian
dollar was down 1.4 percent against the dollar at $0.6314
<AUD=>and the New Zealand unit fell 1.9 percent to $0.4930
<NZD=>.
The euro fluctuated between gains and losses, with the last
bid down 0.1 percent at $1.2625 <EUR=>.
Troubled U.S. insurer American International Group <AIG.N>
was again in the spotlight and helped bolster demand for the
dollar.
AIG had warned of turmoil around the globe if the U.S.
government allowed it to fail, according to a Bloomberg report
that cited an AIG presentation on Feb. 26 when AIG appealed to
U.S. regulators for its latest rescue. The report underscored
the depth of the U.S. financial crisis. []
STERLING, YEN LOSSES
The dollar's biggest gains came against sterling, which
fell to $1.3743 <GBP=>, the lowest level since Jan. 26, with
analysts noting a particularly strong link between the UK
currency and moves in equity markets. Sterling last traded at
$1.3808, down 1.9 percent.
"Cable continues to be vulnerable to the woes of the UK
financial sector as (investors) fear -- despite massive
government capital injections and guarantees -- many of the key
banking institutions will not be able to survive the crisis,"
said Boris Schlossberg, director of FX research at GFT in New
York.
"The rescue packages are beginning to be viewed as classic
examples of throwing good money after bad," he added.
Global recession fears also gripped markets. The yen fell
after Japan swung to its first current account deficit in 13
years [] and investors continued to digest Friday's
grim U.S. jobs data, which brought the unemployment rate to a
25-year high in February [].
A deepening downturn in Japan has taken the shine off the
Japanese currency's attraction as a safe-haven currency in
recent weeks, taking the dollar back within sight of the
100-yen mark.
The euro gained 0.3 percent to 124.71 <EURJPY=>.
With little in the way of key economic data due on Monday,
analysts said market players would be wary of the possibility
of any more negative news on either the corporate or the
economic front that could intensify market risk aversion.
(Reporting by Nick Olivari and Gertrude Chavez; Editing by Dan
Grebler)
