April 27, 2009 / 6:13 PM / 10 years ago

FOREX-Dollar, yen rise as flu scare dampens risk appetite

* Yen, dollar climb on swine flu concerns

* Dollar hits 1-month low vs yen

* Mexico peso on track for worst day vs dollar in 5 months (Updates prices, adds comment, changes byline)

By Gertrude Chavez-Dreyfuss

NEW YORK, April 27 (Reuters) - The U.S. dollar and yen gained broadly on Monday, as concerns about a widening outbreak of swine flu in Mexico prompted investors to seek shelter in the safety of both currencies.

News of the flu pandemic pushed the yen to a one-month peak versus the dollar, drove the Mexican peso to its worst performance against the greenback in five months, and pressured currencies seen as higher risk, such as the Australian and New Zealand dollars.

The concern was that the flu epidemic could delay any global economic recovery.

“The swine flu has pushed traders to the safety of the yen, although I don’t expect this to have a very long life,” said Andrew Wilkinson, senior market analyst at options market maker Interactive Brokers in Greenwich, Connecticut.

“The news has the potential to reduce travel, tourism, trade, and to keep the consumers away from the malls.”

In early afternoon trading, the dollar fell 0.4 percent against the yen to 96.73 yen JPY=, close to an earlier one-month low around 96.44 yen, according to Reuters data, while the euro lost more than 2 percent to 125.82 yen EURJPY=R.

Against the dollar, the euro fell 1.8 percent to $1.3011 EUR=, extending losses after comments by European Central Bank governing council member Ewald Nowotny saying euro zone rates will stay low for a long time. He also said the ECB is ready to use quantitative easing measures if needed. See [ID:nNAT004903].

The euro zone’s single currency had gained around 1.5 percent last week following a string of improved euro-zone economic data.

The Mexican peso MXN=, meanwhile, traded at around 13.9040 per dollar, with the greenback up 4.3 percent on the day, its best performance since November 2008. The U.S. dollar also hit a nearly a one-month high at 13.9700 pesos.

SWINE FLU PRESSURE HIGH-YIELDERS

The swine flu in Mexico, which has spread across North America and as far as New Zealand, may have killed 149 people and the number of cases is seen rising, according to Health Minister Angel Cordova. For more, see [ID:nN27535149].

In New York, Mayor Michael Bloomberg said the city has 45 confirmed or likely cases of swine flu and that number is likely to rise as testing of more than 100 sick students continued. See [ID:nN27325794].

An increase in risk aversion on concerns that the flu may turn into a pandemic stung the higher-yielding Australian dollar AUD=, down 1.6 percent against the U.S. dollar at US$0.7116, and the New Zealand NZD= dollar, down 1 percent at US$0.5666.

The New Zealand currency was also under selling pressure because its central bank is expected to cut benchmark interest rates to a record low of 2.5 percent this week and signal no chance of a rise for a while. [ID:nWEL494385]

Analysts noted, however, that the intense overall risk aversion may have been overdone and could fade, as long as there is no more news of the flu outbreak spreading.

President Barack Obama said on Monday U.S. officials were closely monitoring cases of swine flu in the country, but he said there was no immediate cause for alarm.

Aside from flu concerns, analysts said market participants were looking ahead to the European Central Bank’s monetary policy meeting on May 7.

The central bank is widely seen cutting its key interest rate to 1 percent from 1.25 percent. Investors are watching to see whether it will outline possible quantitative easing measures to help bolster the recession-hit economy. [ECB/INT] (Additional reporting Nick Olivari; Editing by Chizu Nomiyama)

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