* Dollar, yen higher after China tightening move
* Euro hits 9-month low, dollar 5-week low vs yen
* Fed policy meeting, Bernanke reconfirmation in focus
(Updates prices, adds details)
By Steven C. Johnson
NEW YORK, Jan 26 (Reuters) - The dollar rose on Tuesday
after China told certain banks to raise reserve requirements,
dulling investor demand for high-yield assets and currencies on
fears the lending restrictions may slow a global recovery.
The Japanese currency also rose as investors unwound trades
financed with cheaply-borrowed yen and dollars amid concerns
that China was trying to cool a blistering pace of economic
growth. For details, see []
"Reports that Chinese banks have begun to restrict new
loans and the sheer reality of this happening is making traders
realize that China is getting very serious about slowing their
economy," said Kathy Lien, director of research at GFT Forex in
New York.
The euro fell 0.4 percent to $1.4093 <EUR=> as increased
risk aversion outweighed a survey that showed German business
sentiment improved by more than expected this month.
[]
The euro also fell 1.1 percent to 126.38 yen <EURJPY=>,
while the dollar shed 0.7 percent to 89.67 yen <JPY=>, near an
earlier five-week low of 89.35 yen, according to Reuters data.
Reports showing U.S. consumer confidence in January rose to
its highest level since September 2008 and a slide in November
home prices had limited impact on currencies. []
STERLING SLIPS, S&P WARNS ON JAPAN
Sterling fell 0.6 percent to $1.6148 <GBP=>. While data
showed the UK economy emerged from recession at the end of
2009, growth remained weak, suggesting higher interest rates
were a long way off.
The higher-yielding Australian and New Zealand dollars both
fell against the dollar and yen.
The yen had earlier trimmed gains after ratings agency
Standard and Poor's revised its outlook on Japanese sovereign
debt to negative from stable, but it recovered quickly on the
view that only a small proportion of Japanese government bonds
are held offshore. []
"It would be a very different story if a lot of foreigners
held JGBs (Japanese government bonds). It is another reminder
that the fiscal side of the story continues to rot in many of
the developed economies and I think that's at the forefront of
investors' minds right now," said Paul Mackel, director of
currency strategy at HSBC in London.
Japan's Deputy Finance Minister Yoshihiko Noda pledged
fiscal discipline following the S&P announcement. Finance
Minister Naoto Kan echoed those comments, saying Japan must
have a road map to restore fiscal health. []
Markets were also awaiting Wednesday's interest-rate
announcement and policy statement from the Federal Reserve as
well as a looming Senate confirmation vote for Ben Bernanke,
who was nominated by President Barack Obama to a second term at
the helm of the U.S. central bank.
Bernanke's current term expires on Jan. 31. []
