Dollar rises on Goldman, Greece worries; yen slips

By Wanfeng Zhou

NEW YORK (BestGrowthStock) – The U.S. dollar rose on Monday as concerns over fraud charges against Goldman Sachs and a delay in planned talks on an aid package for Greece stoked safe-haven demand.

Further Chinese measures announced over the weekend to rein in the surging real estate market added to worries about the global economic outlook and fueled risk aversion.

Stock markets worldwide came under pressure, although Wall Street regained some ground in late trading, causing the dollar to pare its early gains versus the euro.

“The market is focusing on sort of the main risks to economic growth,” said Jessica Hoversen, fixed income and currency analyst at MF Global Ltd in Chicago.

“You have what’s going on with the financial industry. Greece continues to be a headline. People are (also) a little afraid that the Chinese economy is going to start slowing in the wake of all these measures,” she added.

The dollar typically gains in times of greater aversion to risk as investors put money into Treasuries for safety.

In late New York trading, the euro slipped 0.1 percent to $1.3481 after earlier falling to $1.3415, its lowest in more than a week, according to Reuters data.

The euro zone currency fell as low as 123.18 yen, its lowest in about three weeks, before recovering to last trade at 124.56 yen, up 0.1 percent on the day.

Traders said the 61.8 percent retracement of the February to April rally was the next support level at 122.75 yen.

Goldman Sachs Group Inc (GS.N: ) faced rising regulatory and legal pressure on Monday as allegations that the bank duped clients fueled momentum for regulatory reform on both sides of the Atlantic.

Investors are also worried about how a European Union-International Monetary Fund aid plan to help Greece avoid a debt default might be implemented.

Talks with EU and IMF officials, expected to start on Monday, were delayed to later in the week, Greece said, because of the volcanic ash cloud disrupting flights across Europe.

The premium which investors demand to buy Greek government bonds rather than German benchmark bonds rose to record levels on Monday as uncertainty over the aid package unsettled investors.

Economic sentiment was hurt by news China was making local governments hike mortgage rates to help rein in property speculation. Chinese shares suffered their biggest percentage loss in 8 months.

Against the yen, the dollar rose 0.3 percent to 92.39, after trading lower during most of the European session. The pair got a boost after a gauge of the U.S. economy’s prospects compiled by The Conference Board, a private research group, hit a record high in March.

“It seems like we are reversing some of the risk aversion trades from this morning as people get more comfortable with the Goldman news,” said Boris Schlossberg, director of FX research at GFT in New York.

“Clearly, there is a higher degree of caution. But there has been no additional bad news on Goldman. So for now, investors are in a ‘see-no-evil, hear-no-evil’ kind of mode.”

Analysts say the Japanese currency is likely to continue to weaken as long as dollar/yen holds above 91.

“The yen faces a lot of headwinds, notably deflation,” said MF Global’s Hoversen. “Japan is going to be one of the countries that will likely be the last to remove its stimulative policy.”

The ICE Futures’ dollar index (Read more about the global trade. ), a gauge of the greenback’s value against a basket of currencies (.DXY: ) rose 0.2 percent to 80.945, though it remains well below a 10-month high of 82.240 set in March.

The pound fell 0.2 percent to $1.5332 on persistent concerns that Britain’s upcoming general election will produce no clear winner. Opinion polls ahead of the May 6 vote indicate growing support for the Liberal Democrats, the third party in the race.

(Additional reporting by Gertrude Chavez-Dreyfuss; Editing by Andrew Hay)

Dollar rises on Goldman, Greece worries; yen slips