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Dollar Firms, Yen Falls on Hatoyama News

The dollar opens mostly firmer, posting solid gains against the yen on political uncertainty after Japanese Prime Minister Yukio Hatoyama resigned overnight.

By Joe Manimbo of Travelex



) -- The dollar opened mostly firmer on Wednesday, posting solid gains against the yen on political uncertainty after Japanese Prime Minister Yukio Hatoyama resigned overnight.

The euro was mixed Wednesday as the continent's ongoing debt crisis kept it above but near Tuesday's fresh four-year low against the greenback, while it steadied against the broadly weaker Japanese currency.

Overall investor sentiment was mixed as traders took some comfort from Tuesday data that showed a better-than-expected reading on U.S. manufacturing and Wednesday's above-forecast Australian growth figures during the first quarter. Still, Asian and European stocks were mostly negative overnight, which tends to turn investors away from riskier assets and toward the relative safety of the dollar.

The yen, ordinarily a top destination for investor refuge, saw its safe-haven appeal eclipsed by the political instability brought on by the resignation of Japan's prime minister.

The Canadian dollar remained under pressure against its U.S. counterpart, despite a local interest rate hike the previous day that saw Canada become the first G7 nation to boost interest rates in nearly two years. Instead, the loonie is taking its cue from the market's overall preference for safety.


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: Challenger, Gray & Christmas' survey of planned layoffs increased by 1.3% to 38,810 in May from April's four-year low of 38,326. Despite the modest increase in U.S. planned layoffs in May, the overall trend has improved markedly and is down about 65% from levels seen in May 2009. The data support the notion that the U.S. labor market continues to heal, albeit at a leisurely pace. Investors' focus for the week will be on Friday's U.S. nonfarm payrolls report, which is forecast to show a creation of 425,000 jobs in May which is seen nudging the jobless rate down to 9.8% from 9.9%. A report on U.S. pending home sales in April was due out at 10 a.m. EDT this morning.


: The pound has firmed in recent sessions despite the market's overall aversion to riskier assets that typically weigh on the U.K. currency. The pound has been supported by news that

Prudential PLC

, the U.K.'s biggest insurer, has scrapped plans to buy


(AIG) - Get Report

Asian subsidiary. The sheer magnitude of the price tag, reported at $35.5 billion, would have put downward pressure on sterling as Prudential would have had to sell that amount worth of pound's to acquire AIG's Asian subsidiary. Still, the pound's newfound appeal could prove to be short-lived, given the uncertain outlook for U.K. growth.


: The euro started Wednesday modestly softer against the dollar as persistent concerns about sovereign debt in the 16-nation zone continued to dull the single currency's appeal. Nevertheless, the euro advanced against a broadly weaker yen following the overnight resignation of Japanese Prime Minister Yukio Hatoyama. The common currency took little immediate direction from stronger-than-forecast producer prices. The eurozone PPI rose 0.9% month over month in April, its highest level since July 2008. The sharper-than-expected rise in wholesale prices was mostly the result of higher energy prices.