Dollar gains on yen as markets wait for Obama

TOKYO, Jan 19, 2009 (AFP) - The dollar rose against the yen in Asia Monday as hopes grew for new measures by incoming president Barack Obama to spur the US economy and rescue ailing banks, dealers said.

The dollar gained to 91.03 yen in Tokyo morning trade from 90.67 in New York late Friday.

But the greenback lost ground against the euro, which climbed to 1.3315 dollars from 1.3264 and to 121.14 yen from 120.35.

Traders were anticipating stepped-up efforts by the Obama administration to shore up the economy and clean up the debt-laden financial system, Sumitomo Trust & Banking strategist Saburo Matsumoto said.

Dealers said Obama's inauguration on Tuesday could lift confidence in the US economy, even though conditions are expected to remain tough for some time.

Obama's inauguration "might refocus attention on the size of the policy response to pull the US economy out of recession," NAB Capital strategist John Kyriakopoulos wrote in a note.

"Still, it will likely take some better-than-expected economic news from the major economies to turn worsening sentiment around," he said.

Markets were watching reports that Washington is planning to set up a government entity that would buy back soured assets and loans from banks in an effort to cleanse the financial system, dealers said.

British Prime Minister Gordon Brown was meanwhile set to unveil Monday a new package of measures allowing the government to underwrite the bad debt of banks in an attempt to unfreeze lending.

With banks still reeling from heavy losses more than a year since the financial crisis erupted, "uncertainty over financial institutions must be removed or else markets will become unstable again," said Matsumoto.

The US government last week extended a new 20-billion-dollar capital lifeline to Bank of America to help it weather the ongoing financial crisis, while Citigroup announced it would split in two in the face of massive losses.

Source: AFP

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