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U.S. dollar gains on yen as North Korea spooks markets
Agence France-Presse
Page 19
2009-05-26 12:17 AM
The U.S. dollar rose against the yen in Asia yesterday as traders reacted nervously to North Korea's announcement that it had carried out a nuclear test, dealers said.

The U.S. currency climbed to 95.09 yen in late Tokyo trade, up from 94.78 in New York on Friday. The euro climbed to US$1.4021 from US$1.3995 and to 133.34 yen from 132.64.

Investors bought the "safe haven" greenback after North Korea announced that it had staged a "successful" nuclear test.

Although the yen is also seen as a safe bet in times of uncertainty, dealers said Japan's geographical proximity to North Korea - which also reportedly fired a short-range missile - was making the currency less attractive.

"Global markets shifted into risk aversion mode following the reports (of the nuclear test) with most currencies giving up some gains against the dollar," said Societe Generale analyst Patrick Bennett.

The dollar rose against the South Korean won. In late Asian trade it stood at 1,249 won, up from 1,247 on Friday.

The euro, seen by many investors as a more risky bet than the greenback, initially tumbled on the North Korea news but later regained the key US$1.4 level, which it had topped on Friday for the first time since Jan. 2.

Traders said North Korea's announcement was not a huge surprise given its previous nuclear test in October 2006.

"North Korea just did a missile test recently, and it has been saying it may resume nuclear tests," Jun Kato, a senior dealer at Shinkin Central Bank, told Dow Jones Newswires. Fears about a possible downgrade of the U.S. sovereign credit rating continued to hang over the market.

Such worries mounted after credit ratings agency Standard & Poor's last week downgraded its outlook for Britain's sovereign debt.

Last Friday Moody's said that while its own top "AAA" rating on the United States was stable it was "not guaranteed forever."

Traders were waiting for U.S. housing data and gross domestic product figures for the first quarter due this week for clues on the economic outlook.

 
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