The yen fell against higher-yielding currencies
after governments in the U.S., Europe and Australia pledged to support
banks, encouraging investors to increase holdings of euros, British
pounds and Australian dollars.
German investor confidence dropped for
the first time in three months in October, to near a record low, as the
global credit crisis threatened to tip Europe into a recession.
The
ZEW Center for European Economic Research said its index of investor
and analyst expectations slumped to minus 63 from minus 41.1 in
September. The gauge reached an all-time low of minus 63.9 in July.
Economists expected a decline to minus 51.1.
``The
financial-market turmoil is the main cause for the drop in the index,''
Sandra Schmidt, an economist at ZEW, said in an interview on Bloomberg
Television. ``There's concern that it will spread to the real
economy.''
Europe's economy may be cushioned by falling oil prices, the euro's retreat and lower interest rates.
U.K. inflation quickened
to the fastest pace in at least 11 years in September, squeezing
consumers with higher living costs as the financial market crisis
curbed the availability of credit.
Prices rose 5.2 percent from a
year earlier, the most since records began in 1997, the Office for
National Statistics said in London today. The median forecast of
economists was 5 percent. Inflation has now exceeded the Bank of
England's 2 percent target for a year.
``The weakness in the
economy will be more than enough to bring inflation to target,'' said
Nick Kounis, an economist at Fortis in Amsterdam and a former U.K.
Treasury official. ``Today's reading isn't a barrier to further rate
cuts. The bank is more worried about inflation undershooting the target
now.''
The pound was little changed at $1.7502 after the report.
Stocks recovered for a second day after the U.K. government bailed out
banks including HBOS Plc and similar measures were adopted in Europe
and the U.S
EUR/USD slowly extending its rally, but reported offers between
$1.3750/55 making upside progress sticky. Stops are noted on a break of
$1.3755, which if triggered seen
bringing the tech target range between $1.3780/00 well into view.