* Dollar slips vs yen as data raises recession worries
* Fear about slower growth offsets bank rescue plans
* Euro falls as risk appetite takes a hit
* Norway cuts interest rates by 50 bps
(Updates prices, adds comment, detail)
By Steven C. Johnson
NEW YORK, Oct 15 (Reuters) - The dollar fell against the
yen on Wednesday as a sharp slide in September retail sales
left investors fretting the government's $250 billion injection
into troubled banks may not keep the economy out of recession.
The euro and high-yielding currencies also slid as world
stocks fell, ending a rally seen earlier this week after U.S.
and European governments announced sweeping bank rescue plans.
By midday, the dollar and euro were both at least 1 percent
lower against the yen, which rises when risk appetite wanes.
Data showing U.S. retail sales posted their biggest monthly
decline in more than three years last month "really highlights
the problems we are seeing in the U.S. economy," said Kathy
Lien, director of currency research at GFT Forex in New York
"The question on everyone's minds is how deep of a
recession. Today's number indicates a very strong chance of
negative growth for the third quarter" and hints at more
interest rate cuts from the Federal Reserve, she added.
The Fed cut the key federal funds rate by half a percentage
point last week in concert with other major central banks, and
Fed Chairman Ben Bernanke was set to speak in New York at 12:15
p.m. (1615 GMT) on the economic outlook and financial markets.
Late morning, the dollar was changing hands at 101.40 yen
<JPY=>, down 0.8 percent but off a session low of 100.88. The
euro was down 1.2 percent at 137.57 yen <EURJPY=> and was off
0.4 percent against the dollar at $1.3571 <EUR=>. Sterling rose
0.2 percent to $1.7440 <GBP=>.
The low-yield Japanese currency rallies when risk appetite
fades as investors rush to get out of trades in higher-yielding
currencies and assets financed with cheaply borrowed yen.
The greenback has lately also tended to benefit in such an
environment against the euro and high-yield currencies as
investors seek relative safety in dollar-denominated assets.
The Australian dollar fell 2.4 percent to $0.6829 <AUD=>,
while the greenback rose 1.6 percent against its Canadian
counterpart to C$1.1799 <CAD=> as oil prices fell.
The dollar rose 1.8 percent against the Norwegian crown
after Norway cut interest rates by half a percentage point
<NOK=>.
RECESSION, RATE CUTS IN FOCUS
Governments around the world in recent days have announced
plans to kick-start lending and shock the financial system out
of paralysis by injecting billions of dollars directly into
banks and guaranteeing many types of bank borrowing.
Traders said fears about the financial crisis receded after
short-term interest rates for dollars eased Wednesday, though
analysts warn the economic fallout from the crisis is still
likely to slow global growth sharply.
The U.S. sales data bolstered that view, as did remarks
late Tuesday from San Francisco Fed President Janet Yellen, who
said the United States "appears to be in a recession" and
"virtually every major sector of the economy has been hit by
the financial shock."
The market will soon refocus on economics, "and when it
does, it will likely trade on the notion that global growth is
likely to have a very soft 2009," said Dustin Reid, head of FX
strategy at RBS Global Banking & Markets in Chicago.
A U.S. report showing a relatively tame increase in core
producer prices, which strip out food and energy, may provide
cover for more Fed rate cuts by year end. For details, see
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The European Central Bank is also expected to cut rates
again after reducing its refinancing rate to 3.75 percent this
month. Euro-zone data on Wednesday showed that slowing growth
in energy and food prices helped to curb inflation in the
region in September.
(Additional reporting by Nick Olivari in New York; Editing by
Tom Hals)
