Yen gains on USD

The Japanese yen gained on the US dollar Wednesday on a perceived lack of details regarding the US government plan announced Tuesday to bail out US banks, with fewer investors willing to make risky currency investments after equities markets declined on Tuesday after US Treasury Secretary Timothy Geithner unveiled the plan.

The yen also strengthened versus the Canadian dollar and the South African rand in the flight from risk.

In late morning trade in New York the yen traded at ¥90.405 to the US dollar while it was at ¥116.7872 to the euro, at ¥72.696 to the Canadian dollar and at ¥9.1403 to the South African rand.

The euro was hurt by the possibility raised by European Central Bank officials, that Eurozone interest rates could drop below 2 percent soon and after Credit Suisse (SWX: CSGN; NYSE: CS) reported a bigger loss than expected in the fourth quarter.

Meanwhile, the pound weakened versus both the US dollar and the shared currency on comments from Bank of England governor Mervyn King, who said that efforts to rehabilitate credit markets might not be successful and characterized the UK’s recession as “deep”.

The remarks hurt the pound, as did a report from the Bank of England which said that the UK economy will contract by an annualized 4 percent in the first quarter and that by the end of 2010 inflation will be at just 0.5 percent, which raised the possibility that the Bank’s Monetary Policy Committee could cut interest rates again.

More bad news for the UK economy came from the Office for National Statistics, which said that UK unemployment rose by 73,800 to 1.23 million in January, the most in nearly ten years.

The pound traded at 89.96 to the euro at late morning in New York, while at the same time the dollar traded at $1.436 to the pound.

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