* Yen rises broadly as Tokyo stocks head south
* Demand for yen, dollar intact on global economic worries
* Euro, pound slip before rate decisions from ECB, BoE
* NZ dlr off lows as market rewards proactive central banks
By Satomi Noguchi
TOKYO, Dec 4 (Reuters) - The yen and the dollar rose against
other major currencies on Thursday, supported by concerns about a
long and deep global recession and expectations that central
banks in Europe will cut interest rates later in the day.
The euro and the British pound were vulnerable before
decisions by the European Central Bank and the Bank of England,
with expectations high that they will ease monetary policy
aggressively to boost deteriorating economies and counter the
threat of deflation.
Tokyo shares fell after rising earlier, keeping demand for
the low-yielding yen and the safe-haven greenback intact after a
slew of dismal data around the world kept investors concerned
about the depth of the global recession.
Investors became cautious following a Bloomberg report that
General Motors and Chrysler are considering accepting a
pre-arranged bankruptcy plan in exchange for a U.S. government
bailout. []
Japanese companies cut investment in the third quarter by a
higher-than-expected 13 percent from a year ago, a report showed,
leading economists to expect the country's gross domestic product
data, which has already initially shown a contraction, will be
adjusted lower.[]
A report also showed the U.S. service sector posted its worst
slump on record, adding to fears about Friday's release of the
government's monthly employment figures. []
"Having seen weak economic numbers coming in one after
another, it's difficult for market sentiment to improve
dramatically," a senior trader at a major Japanese bank said.
The euro fell 0.3 percent from late New York trade to $1.2676
<EUR=>. The European Central Bank is seeing cutting rates on
Thursday by at least 50 basis points to 2.75 percent, but many
economists are expecting a 75 basis point cut.
Sterling was down 0.4 percent at $1.4730 <GBP=D4> after data
showing that Britain's service sector shrank faster than expected
in November. Against the yen, it fell 0.8 percent to 137.01 yen
<GBPJPY=R> but stayed above a 13-year low around 136.30 yen hit
the previous day.
The data boosted expectations that the Bank of England may
slash rates by at least a full percentage point from 3.0 percent
later in the day to shore up the domestic economy.
Traders said the euro and the pound could fall further if
large interest rate cuts came in as expected due to their
diminishing higher-yielding appeal.
But they may rebound quickly because investors now reward
currencies of countries that have been acting proactively to save
the economy from a deep recession, traders said.
"The market may have become used to extremely weak economic
numbers and now wants to see how dramatic policy action taken
across the globe, including monetary easing, will impact the
economy and stock markets," said Etsuko Yamashita, chief
economist at Sumitomo Mitsui Bank.
"If stock markets become more resistant to further falls, the
yen may have difficulties making further gains," Yamashita said.
The dollar was down 0.3 percent at 93.07 yen <JPY=>, crawling
towards a five-week low of 92.53 yen hit on trading platform EBS
the previous session. The euro slid 0.5 percent to 117.96 yen
<EURJPY=R>.
The yen has been the strongest among the world's major
currencies despite Japanese investors' having been steady buyers
of overseas assets.
Japanese investors have been net buyers of foreign stocks for
the past 10 weeks, snapping up a total 2.87 trillion yen ($30.77
billion), government data showed on Thursday. []
But the impact from such buying has been overshadowed by
heavy unwinding of carry trades, in which investors use the
low-yielding yen to purchase higher-yielding currencies or assets
elsewhere.
The New Zealand dollar slipped 0.5 percent to $0.5300
<NZD=D4>, after the country's central bank cut interest rates by
a record 150 basis points to 5.0 percent, as expected.
[]
(Additional reporting by Rika Otsuka; Editing by Chris
Gallagher)
