LONDON, Feb 12 (Reuters) - The dollar and yen rose on Thursday as investors drew comfort in the perceived safety of those units as stocks fell, fueled on concerns about the potency of government policies to combat recession and ailing banks.
Stocks, Bonds & Forex Trading
Source: uk.reuters.com
Thu Feb 12, 2009 By Tamawa Desai

European shares .FTEU3 were lower in early trade after Asian stock markets fell, as disappointment lingered after the U.S. bank rescue plan on Tuesday fell short on detail. Investors remained wary despite U.S. Congress reaching a compromise deal on the economic stimulus package.

"The market is vaguely risk adverse," said Christian Lawrence, currency strategist at RBC Capital Markets, but added it lacked clear direction.

The dollar index against a basket of currencies was up 0.2 percent at 86.087 .DXY.

By 0845 GMT, the dollar was down 0.5 percent at 89.99 yen while the euro was also down 1.1 percent at 115.27 yen .

The euro was down 0.4 percent at $1.2841 .

Traders will look to economic data including euro zone industrial production and U.S. retail sales data later on Thursday.

Industrial production in the euro zone is seen falling 2.1 pct in December from the previous month, or a fall of 8.9 year-on-year.

Traders will also keep an eye as European Central Bank President Jean-Claude Trichet speaks, as well as a slew of other ECB officials.

ECB officials that commented on Wednesday confirmed market expectations the central bank will cut interest rates next month, but nothing to further such views, analysts said.

Markets hope to get a cue from U.S. retail sales, which probably fell again in January. Total sales are forecast to fall 0.8 percent after tumbling 2.7 percent in December, while sales excluding autos are seen falling by 0.5 percent after a record 3.1 percent plunge in December.

"The weak tone of the data will provide an offset to what little enthusiasm prospective passage of the U.S. fiscal package may foster," Daragh Maher, deputy head of currency strategy at Calyon, said in a note.

"The weakness in Asian equities overnight suggests that disappointing data and the lack of detail so far from (U.S. Treasury Secretary Timothy) Geithner will win out over fiscal optimism, pointing to modest gains for the dollar and yen."

U.S. congressional negotiators reached a deal on Wednesday on $789 billion in emergency spending and tax cuts aimed at pulling the economy out of a deepening recession, and voting on it could take place as early as on Thursday. [ID:nN11379390]

Sterling hit one-week lows against the dollar and euro, keeping its downward trend after the Bank of England said it may need to ease policy further, including steps such as buying gilts to boost the money supply. The pound was down 1.3 percent at $1.4186 . The euro was up 0.9 percent at 90.45 pence.

The Australian dollar was down 1.0 percent to $0.6482, after parliament rejected the government's A$42 billion ($28 billion) economic stimulus plan.