The yen rose against the dollar and the euro on speculation a drop in
stocks will lead investors to sell higher-yielding assets and pay back
low-cost loans in Japan, unwinding the carry trade.
Japan's currency erased its decline versus the dollar and the euro
after U.S. stocks reversed their rally as analysts predicted that
Goldman Sachs Group Inc. will post its first quarterly loss and that
Google Inc.'s sales will be hurt by the slowing economy.
The Standard & Poor's 500 Index fell 1.4 percent after advancing as
much as 2.3 percent on China's announcement of a $586 billion economic
stimulus and the U.S. government's expanded rescue of insurer American
International Group Inc. The Dow Jones Industrial Average decreased 0.9
percent after earlier gaining as much as 2.4 percent
China's stimulus plan, equivalent to almost a fifth of last year's
gross domestic product, was announced yesterday as major export markets
slumped. Japan will contract 0.2 percent next year, the U.S. by 0.7
percent and the euro area 0.5 percent, while China will expand 8.5
percent, the International Monetary Fund said last week.
The Group of 20 industrial and emerging nations, meeting yesterday in
Sao Paulo, said they're ready to act ``urgently'' to support global
growth. The group called on countries to cut interest rates and raise
spending to combat the threat of a global recession. The leaders of the
industrial and emerging countries, due to gather Nov. 14 and 15 in
Washington, will consider steps ranging from raising bank-capital
standards to regulating hedge funds.
Gains in the euro may be curbed after European Central Bank President
Jean-Claude Trichet said at a press conference in Sao Paulo that
receding inflation may allow central banks to further reduce interest
rates to tackle the economic slowdown.
``There's talk of more ECB rate cuts, given the pessimistic outlook on
Europe's economies,'' said Tsutomu Soma, a bond and currency dealer at
Okasan Securities Co. in Tokyo. ``The medium- to long-term downtrend
for the euro is likely to persist.''
Traders increased bets the ECB will reduce its 3.25 percent rate in the first quarter of next year.
Tuesday markets will be thin with the US remaining closed
for to observe Veterans' Day. UK data at 0930GMT sees the DCLG House
Price Index and also Trade data for September. The world trade in goods
balance is seen at -stg8 billion with the total trade balance at
-stg4.7 billion and the non-EU balance at -stg5 billion. Core-European release is the German ZEW
data, where the current conditions index is expected to fall further to
-45. Also, at 1530GMT, ECB Governing Council member Erkki Liikanen is
due to speak at a Bank of Finland event, in Helsinki.