FOREX-Dollar, yen rise on risk aversion, high-yielders slip

Yen is rising. The dollar and yen rose broadly on Thursday as falling share prices sapped demand for risky investments, while the euro fell as dismal German economic data kept concerns intact about the deteriorating euro zone economy.

The dollar gained versus higher-yielding currencies as ongoing worries about the global economy stung oil prices and pushed commodity currencies like the Australian and New Zealand dollars lower.

This helped the U.S. currency recover somYe losses suffered in the previous session due to a disastrous reading of U.S. employment, but the dollar fell against the yen, which benefited from risk aversion as European shares .FTEU3 fell 0.8 percent in early trade.

Sterling slipped against the dollar ahead of a rate announcement by the Bank of England due at 1200 GMT. The central bank is expected to cut interest rates by 50 basis points or more from 2.0 percent in an attempt to buffer the UK economy from a deep recession.

"The ADP jobs number was poor to say the least, but the dollar has generally put in a stronger performance on the back of the undertone of risk aversion," said Phyllis Papadavid, currency strategist at Societe Generale in London.

She added: "Oil prices continue to go lower, so it's not a very good environment for commodity currencies."

Bu 0900 GMT, the euro had fallen 0.7 percent to a session low of $1.3536 according to Reuters data, edging towards a three-week low around $1.33 hit earlier in the week.

Selling in the euro picked up following figures showing an unprecedented 10.6 percent month-on-month fall in German exports in November as global demand for cars and other manufactured products have plummeted due to a global recession [nL88871].

The data comes ahead of a raft of regional figures due later in the day, including economic growth, unemployment and business and consumer sentiment, as well as German industrial orders.

The dollar .DXY rose half a percent against a currency basket to 82.550, and rallied roughly 2 percent against the Australian dollar to $0.6966.

The Aussie sold off after a hefty fall in Australian building and trade data reinforced the case for more rate cuts in the country [nSYD246358].

COMMODITIES PRESSURE

Commodity currencies have also come under selling pressure due to falling oil prices, which have taken a hit on the view that a slowing global economy will decrease demand for oil.

U.S. crude oil prices CLc1 fell 0.5 percent to $42.38 per barrel, extending losses after dropping more than 12 percent in the previous session. This helped to push the New Zealand dollar down 1 percent to $0.5845.

Despite its gains against most currencies, the dollar fell nearly 1 percent against the yen to a session low of 91.57 yen, according to Reuters data.

Investors have favoured the yen against the dollar as well as other currencies following figures on Wednesday showing a 693,000 cut in U.S. private jobs in December, which continued to hit home the view the U.S. economy is deteriorating, which will batter the wider global economy.

This has decreased demand for risky investments, prompting investors to continue unwinding risky yen carry trades, which involved using the low-yielding yen to pick up assets in higher-yielding ones.

High risk aversion was also reflected the bond market, which rallied despite damp demand for new issuance around the world, and pushed the two-year euro zone government bond yield to its lowest since the early 1970s, according to market participants.