US dollar falls against yen on risk reduction; sterling sinks

[NEW YORK] The US dollar slumped against the safe-haven yen on Monday on investors' reduced appetite for risk, while sterling sank to more than two-month lows on talk that Britain would drastically rework trade ties with the European Union after Brexit.

A fall in US Treasury yields and stocks drove the US dollar down as much as 0.8 per cent against the yen to a session low of 115.97 yen. The US dollar remained within recent trading ranges and did not test Friday's more than three-week low of 115.04 yen.

Analysts said there was no fundamental catalyst for the US dollar's decline against the yen, with traders probably reacting to lower US yields and equities.

"There's an optical relationship with the fact that stocks are lower," said Shahab Jalinoos, global head of FX strategy at Credit Suisse in New York.

The US dollar also fell against the euro and Swiss franc, leading the US dollar index, which measures the greenback against a basket of six major currencies, 0.26 per cent lower at 101.950.

The pound slid more than one per cent against both the US dollar and the euro after weekend comments from British Prime Minister Theresa May that she was not interested in keeping "bits of membership" of the European Union.

Sterling slid as low as US$1.2125, its weakest against the US dollar since the end of October. It fell about 1.3 per cent against the euro, hitting 86.99 pence per euro, the lowest since mid-November.

The euro's strength against the pound had a knock-on effect of pushing the euro higher against the US dollar, said Richard Scalone, co-head of foreign exchange at TJM Brokerage in Chicago.

"The reason why the euro has been relatively well-bid is because a lot of people trade euro/sterling," he said. Analysts also said that some strong European data, including figures showing German exports rose 3.9 per cent in November to mark their strongest monthly gain since May 2012, supported the euro against the US dollar.

Against the US dollar, sterling was last down one per cent at US$1.2161, while the euro was up 0.4 per cent against the US dollar at US$1.0567. The US dollar was down 0.3 per cent against the franc at 1.0148 francs.

On Wall Street, the benchmark S&P 500 stock index was down 0.23 per cent, while benchmark 10-year US Treasury yields were last down about four basis points at 2.376 per cent.

REUTERS