(Adds details, updates prices)
By Lucia Mutikani
NEW YORK, April 11 (Reuters) - The yen rose broadly on
Friday after a fall in industrial conglomerate General
Electric's quarterly earnings stoked fears about the health of
the U.S. economy, causing investors to dump riskier trades.
Analysts said news that General Electric Co <GE.N>, the
second-largest U.S. company by market capitalization, reported
a 6 percent drop in profits and data showing consumer morale
plunged to a 26-year low pointed to a deeper malaise for the
world's economic power house.
"There has been so much complacency stemming from the
notion that systemic risk has diminished just because we are
not seeing any high-profile rescue operations such as Bear
Stearns," said Ashraf Laidi, chief FX strategist at CMC Markets
in New York.
"People have an erroneous sense of comfort and it is
absolutely ridiculous to think the worst is behind us."
A collapse of Bear Stearns <BSC.N>, which had been the
fifth biggest U.S. investment bank, was averted last month when
the Federal Reserve stepped in and helped arrange its sale to
JPMorgan Chase & Co. <JPM.N>.
U.S. stocks fell sharply on Friday, dragging the dollar
lower against the low-yielding Japanese yen and Swiss franc.
The stock market is regarded by investors as a barometer for
risk appetite.
"GE is a good proxy for the U.S. economy. The weakness in
GE (profits) has raised concerns over the weakness of the U.S.
economy. That put some pressure on the dollar," said Ronald
Simpson, director of FX research at Action Economics in Tampa,
Florida.
"The biggest loser has been dollar/yen because it is
significantly correlated to the U.S. equity market's
performance."
The dollar dropped to a session low of 100.66 yen and was
last trading down at 101.07 yen <JPY=>, down 0.8 percent on the
day. The euro fell 0.4 percent to 159.66 yen <EURJPY=>.
CARRY TRADES UNWOUND
The Japanese currency also rallied against the New Zealand
and Australian dollars as concerns about the U.S. economy
encouraged investors to unwind carry trades, which are funded
by borrowing in low-yielding currencies such as the yen and
investing in currencies and assets offering higher returns.
The Swiss franc also came to the party, with the dollar
falling 0.6 percent to 1.0014 francs <CHF=>, while the euro
slipped 0.3 percent to 1.5819 francs <EURCHF=>.
Low-yielding currencies such as the yen and Swiss franc
tend to attract flows during periods of uncertainty as the low
interest rates reflect the capital surplus of their countries.
The euro closed in on this week's record high, supported in
part by speculation that Group of Seven financial officials may
not make a coordinated effort to talk up the dollar when they
meet later in the day.
But the euro's gains were capped as a report showing an
unexpected jump in U.S. import prices in March reminded
investors about swelling inflationary pressures, which could
limit the Fed's ability to continue cutting interest rates.
The euro was last up 0.3 percent at $1.5791 <EUR=> after
rising to a session peak of $1.5819 and not far from a record
high of $1.5902 hit in the previous session, according to
Reuters data.
Analysts said the market was also reluctant to drive the
dollar too much lower ahead of the G7 communique, but many did
not expect any change in the group's language on currencies.
"There is some event risk associated with the G7 meeting,
but I don't think there will be much of substance to come from
the G7 communique. The market overall will pull back a little
bit and not push the dollar too hard on Friday," said Action
Economics' Simpson.
"If we see nothing really concrete coming from the G7, the
dollar might have some problems on Monday."
The euro hit a record high versus sterling at 80.35 pence
<EURGBP=> on speculation of further interest rate cuts in the
UK and last traded up 0.3 percent at 80.10 pence.
(Editing by Leslie Adler)
