* Yen rises, shares slide worldwide on risk aversion
* Sterling falls on weak services PMI
* Market awaits rate decisions from ECB, BoE
* For up-to-the-minute market news, click on <FXNEWS>
(Updates prices, adds quotes, changes byline, changes
dateline,previous LONDON)
By Nick Olivari
NEW YORK, Dec 3 (Reuters) - The yen extended gains across
the board on Wednesday, reflecting heightened risk aversion as
investors cut back on investments in higher-yielding assets
while stocks fell around the world.
Currency moves were subdued ahead of interest rate
decisions on Thursday by central banks in the euro zone,
Britain, New Zealand and Sweden, with expectations high of
aggressive monetary policy easing to counter the threat of
deflation.
Investors have flocked to the dollar and the yen on the
view that the ECB, BoE and other central banks have more scope
to cut rates than the Bank of Japan and the Federal Reserve,
whose rates are already low.
"We speculate that the market is particularly nervous over
the ECB decision tomorrow," said Stephen Malyon, senior
currency strategist at Scotia Capital in Toronto in a note to
clients. "The discrepancy between what many believe the ECB
should do, and what it is expected to do, has produced plenty
of discord between economists over the outcome."
While the consensus ECB call is for a 50 basis point cut to
2.75 percent, there are many economists expecting a 75 basis
point cut, and a not-insignificant number thinking the ECB
could deliver a 100 basis point cut, Malyon said.
In early New York trade, the dollar slid 0.6 percent to
92.83 yen <JPY=>, while the euro fell 1.3 percent to 117.12 yen
<EURJPY=>.
The low-yielding Japanese currency, which hovered near a
five-week high against the dollar, drew strength from tumbling
share prices as European equities fell 1.6 percent <>,
while U.S stock futures <.DJc1> slated a lower market open.
Investors continued to unwind carry trades, where the yen
was used to fund purchases of higher-yielding assets. Analysts
said the yen would take strength from share prices -- often
seen as a barometer of investors' risk appetite -- which
suggest that risk aversion remains high.
The euro <EUR=> fell 0.6 percent to $1.2626, struggling
after data showed further deterioration in the euro zone
services sector.
Earlier in the day, bleak PMI services data for the euro
zone pushed the euro to a session low against the dollar and
the yen, as the figure provided further evidence that the
single currency region is grappling with a recession.
[].
WEAK SERVICES PMI
Sterling fell broadly after data showed that the UK
services sector shrank faster than expected in November
[]. Sterling was last down 1.1 percent against the
dollar at 1.4746 <GBP=>.
The purchasing managers' index (PMI) for the services
sector fell to a series low of 40.1, boosting expectations that
the Bank of England may slash rates by a full percentage point
from 3.0 percent on Thursday to shore up the domestic economy.
A report from ADP Employer Services showing U.S. private
employers cut 250,000 jobs in November, the most in seven years
and more than the 200,000 expected, had little impact on
foreign exchange markets.
"The ADP report is a volatile gauge but the headline figure
of 250,000 seems consistent with deep economic recession and
that's where we are at this point," Kurt Karl, chief U.S.
economist at Swiss Re in New York.
China's central bank entered the domestic foreign exchange
market on Wednesday to offer dollar liquidity, which pulled the
yuan off the bottom of its daily trading band versus the U.S.
currency [].
However, many in the market believe China is adjusting its
currency policy towards moderate yuan depreciation to stimulate
the economy.
(Additional reporting by Vivianne Rodrigues in New York and
Harpreet Bhal in London, Editing by Chizu Nomiyama)
