Dollar, Yen May Gain as Havens on Lack of U.S. Bailout Detail

Feb. 12 (Bloomberg) -- The dollar and yen may gain against the euro as a lack of detail in Treasury Secretary Timothy Geithner’s bank rescue plan increases demand for the currencies as havens from financial turmoil.

The Swedish krona and the pound were the biggest losers yesterday against the dollar among the major currencies after the Riksbank lowered borrowing costs more than forecast and Bank of England Governor Mervyn King said the economy is in a deep recession. The dollar and yen pared gains on bets Congress will send a $789 billion economic stimulus package to President Barack Obama by the end of this week.

“The latest financial rescue plan lacked details, raising questions about its effectiveness,” said Masashi Hashimoto, a currency analyst at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest financial group. “This is positive for safe havens such as the yen and the dollar.”

The dollar rose to $1.2884 per euro at 8:48 a.m. in Tokyo from $1.2906 late in New York yesterday. The yen gained to 116.36 per euro from 116.66. The dollar was at 90.35 yen from 90.40 yen.

Sterling slid 0.02 percent to 89.67 pence per euro and lost 0.2 percent to $1.4363 as King said at a press conference in London yesterday that the slumping British economy may force policy makers to create money after cutting the target lending rate to a record low of 1 percent.

The number of people in the U.K. receiving jobless benefits rose in January to 1.23 million, the most since July 1999, the Office for National Statistics said yesterday.

Weaker Pound

“People in the market are getting out of the pound,” said Geoffrey Yu, a currency strategist in London at UBS AG, the world’s second-biggest foreign-exchange trader. “King said the U.K. is in deep recession. But the lack of confidence that things will work is the most important and unsettling part.”

Sweden’s krona lost 1.3 percent to 10.7917 per euro and 1.4 percent to 8.3701 versus the dollar after the central bank lowered the benchmark interest rate to 1 percent and signaled further reductions to revive lending. The median forecast of 20 economists surveyed by Bloomberg News was for a cut of a half- percentage point.

The yen appreciated 0.2 percent to 78.08 against the Swiss franc on speculation financial turmoil will encourage investors to sell higher-yielding assets and pay back low-cost loans in Japan. The Bank of Japan’s target lending rate of 0.1 percent compares with 0.5 percent in Switzerland.

Geithner on Bailout

Geithner, speaking yesterday before the Senate Budget Committee, defended his strategy of taking time to work out the details of his plan to shore up the financial industry.

“I completely understand the desire for details and commitments,” he said. “But we’re going to do this carefully, consult carefully, so we don’t put ourselves in the position again” where there are “quick departures and changes in strategy.”

U.S. lawmakers are cutting a proposed economic stimulus package to $789 billion and may be able to send it to Obama by the end of this week, said Senate Finance Committee Chairman Max Baucus.

The Brazilian real was yesterday’s biggest gainer versus the dollar among the major currencies as the central bank offered dollar loans to exporters and gauged demand for currency-swap contracts to shore up the currency. The real advanced 1.8 percent to 2.2692 versus the dollar.

The euro declined early yesterday against the yen after a European Central Bank policy maker signaled the main refinancing rate may be cut below 2 percent. ECB Executive Board Member Jose Manuel Gonzalez-Paramo said in an interview on Spain’s Radio Intereconomia that the current rate isn’t the lowest that policy makers can envisage.