DJ WORLD FOREX

Tue Jun 29 16:06:00 EDT 2010

Dollar, Yen Gain As Investors Worry Growth

Is Slipping
By Bradley Davis
Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--The dollar and yen posted broad gains Tuesday as investors shunned
assets closely tied to growth after disappointing economic data led to concern the global recovery
could be losing steam.
The safe-haven yen benefited most from investors unwinding bets on higher-yielding assets, with
the euro plummeting to its lowest level against the Japanese currency since November 2001.
Investors also ditched the Australian and New Zealand dollars, whose commodity-backed
economies are closely tied to global growth. Both dropped more than 2% against the greenback.
"Fear, fear and more fear has driven" investors out of riskier assets, said Dan Cook, senior
market analyst at IG Markets in Chicago.
News that an indicator of Chinese growth was not as strong as originally reported sparked initial
worry over global growth prospects after a private group issued a correction to its data. A steep
decline in U.S. consumer confidence kept investor sentiment poor.
"The latest string of data that we've seen out of most major economies, particularly in the U.S.,
has pointed to a notable loss of momentum in the recovery," said Omer Esiner, chief market
analyst at Commonwealth Foreign Exchange in Washington. That has benefited the dollar, yen
and Swiss franc, which soared Tuesday to a record high against the euro.
Late Tuesday, the euro was at $1.2196 from $1.2276 late Monday, according to EBS via CQG.
The dollar was at Y88.54 from Y89.41, while the euro was at Y107.97 from Y109.78. The U.K.
pound was at $1.5074 from $1.5105. The dollar was at CHF1.0808 from CHF1.0872.
The ICE Dollar Index, which tracks the greenback against a trade-weighted basket of currencies,
was at 86.105 from 85.701.
To see the euro's performance against the yen, please see:
The flight to safety was reflected across markets, with 10-year U.S. Treasury yields dropping
below 3% to the lowest level since April 2009 and stocks slumping. The Dow Jones Industrial
Average was down more than 2.5% by late afternoon.
The global flight to safety began with a correction to the Conference Board's leading economic
indicator for China. The private research group said Chinese leading indicator rose only 0.3% in
April, correcting a previous reading of a 1.7% increase, and a sharp slowdown from March's
1.2% rise.
A sharp drop in U.S. consumer confidence in June exacerbated the shift into safe assets.
Consumer concerns over the sustainability of economic recovery and the outlook for jobs
brought the closely watched indicator's three-month streak of consecutive gains to an end.
Investors also worried that the euro-zone sovereign debt crisis could spill into the region's
financial sector as the Thursday deadline approached for banks to repay EUR442 billion in 12-
month funding. Analysts expect most of the money to be borrowed again through the ECB's one-
week and three-month windows.
As the banks roll over the financing from a one-year term to shorter terms, "the cost these banks
pay may add additional stress to the system, and this has investors very nervous," Cook said.
Souring investor sentiment extended the Swiss franc's record-breaking rally Tuesday, with the
euro sinking below CHF1.32, its lowest level in history.
The euro fell to a low of CHF1.3171, according to EBS via CQG, in a continuation of a recent
trend that has brought record lows on an almost daily basis. The Swiss currency has benefited for
months from a pickup in growth in Switzerland and the country's healthy fiscal position, but the
move has accelerated since the Swiss National Bank stopped intervening to halt the franc's rise.
The euro has declined by around 10% against the franc since the start of this year.
With the ICE Dollar Index strengthening, Deutsche Bank's PowerShares U.S. Dollar Index
Bearish exchange-traded fund was down 0.44% from late Monday, while its PowerShares U.S.
Dollar Index Bullish was up 0.48%. The two exchange-traded funds are based on Deutsche Bank
currency futures indexes, whose composition mirrors that of the ICE's Dollar Index.

Disclaimer
(This article is general financial information, not personalized investment advice, as it does not
consider the unique circumstances affecting an individual reader's decision to buy or sell a
specific security. Dow Jones does not warrant the accuracy, completeness or timeliness of the
information in this article, and any errors will not be made the basis for any claim against Dow
Jones. The author does not invest in the instruments or markets cited in this article.)