Yen gains broadly in London

The yen gained broadly on Monday, as risk appetite was suppressed by expectations of more bad news from the financial sector as the fallout from the US subprime market woes and subsequent credit crunch spreads ever-wider.
Casualties outside the United States have so far included four Norwegian municipalities hit by losses on US investments and German state-backed regional lender WestLB which will make a loss of up to 1 billion euros this year thanks in part to the global credit market crisis.
Some analysts have forecast that Royal Bank of Scotland will announce up to 1.9 billion pounds ($4.13 billion) of credit-related losses this week. "The market is increasingly concerned... that the subprime and credit issues within the US has now an increasing possibility to spill out into a global event and have a bigger impact on the global growth outlook," said Ian Stannard, senior foreign exchange strategist at BNP Paribas."
"In this environment we would expect the low yielders to pick up some support," he added. By 1125 GMT the dollar was down 0.6 percent at 110.52 yen having risen on Friday to 111.23, its highest since mid-November. The euro was down 0.4 percent at 162.35 yen.
It edged up to $1.4661, still about three cents below November's record peaks but recovering some ground on position squaring after posting its biggest weekly fall in percentage terms in over three months.
Last week, the dollar rose 1.5 percent against a basket of currencies - its biggest weekly gain since June 2006 - after the Federal Reserve cemented expectations for interest rate cuts next week and more next year. This boosted confidence on the economic outlook and ignited gains in stock markets.
Markets are fully priced for a 25 basis point Fed cut to 4.25 percent on December 11 and are giving as much as a two-in-five chance of a bigger 50 basis points move.
Investors were reluctant to take big risks before eurozone and British interest rate decisions this week and a closely-watched US employment report which would help to determine the extent of US monetary policy easing next week and in the new year.