Yen, dollar gain in Asia on safe haven flows

Tuesday June 23, 2009 TOKYO: The yen firmed against the dollar and euro Tuesday as investors ran for cover on renewed fears that a world economic recovery will remain slow and painful, dealers said. The euro slipped to 1.3846 dollars in Tokyo morning trade from 1.3856 in New York late Monday. It slumped to 132.13 yen from 132.84. The dollar fell to 95.42 yen from 95.86. The yen and dollar benefited from safe haven flows after the World Bank on Monday sapped hopes that the global economy would be able to show real signs of strength in the near future. "Investors exited high-yielding global growth sensitive currencies like the Australian and New Zealand dollars in favour of the 'safe haven' yen and US dollar," wrote NAB Capital strategist John Kyriakopoulos in a note to clients. In times of economic uncertainty the yen and dollar are considered safer for traders who are more risk averse. Currency traders took their cues from world stock markets, which "slumped on concerns that any economic recovery will be weak," he added. The World Bank Monday downgraded its economic growth forecast for developing countries to 1.2 percent this year, and said that without China and India output would shrink 1.6 percent. China's economy was forecast to expand 7.2 percent in 2009 and 7.7 percent in 2010, while India's forecast was for 5.1 percent followed by 8.0 percent. "More relevant, in our view, is speculation surrounding the possibility of a slowdown in Chinese import buying of commodities," Barclays Capital analysts said in a report. "There are already some early signals that Chinese demand is beginning to ebb, so commodity prices will remain highly sensitive to any deterioration in market sentiment," they added. As the worst financial and economic crisis in several decades continues to bite, the Bank nine days ago lowered its outlook on global growth to a contraction of 3.0 percent this year. It slightly revised this up to 2.9 percent Monday. In 2010, global growth was projected at 2.0 percent, with that of developing countries at 4.4 percent, according to the Bank. Excluding China and India, developing countries would grow 2.5 percent next year, it said. Meanwhile traders were looking ahead to a two-day Federal Open Market Committee meeting beginning later Tuesday amid concerns over the safety of US debt and for clues to future lending rates policy. (AFP)