AUGUST 25, 2010, 1:08 P.M. ET.

WORLD FOREX: Dollar Up Vs Yen; Swiss Franc Sticks Near Peaks

By Frances McInnis Of DOW JONES NEWSWIRES

NEW YORK (Dow Jones)--The dollar gained against the yen on Wednesday as investors weighed their concerns about the U.S. recovery against rising speculation that Japanese authorities will take action to counter yen strength.

Following the release of dismal U.S. housing data, the Swiss franc hit an all-time high against the euro for the second-straight day. The euro fell to a series of record lows, most recently at CHF1.2971 during New York trading. The dollar also fell to its lowest levels since January against the franc.

As "dark clouds continue to hang over the U.S. economy," and investors hold a "more cautious stance on the yen prompted by the latest currency related comments from Japan," the Swiss franc is the most attractive of the three traditional safe havens, said Vassili Serebriakov, foreign exchange strategist at Wells Fargo in New York.

"The Swiss National Bank has refrained from intervention in recent months, which is another factor encouraging demand for the franc," he added.

Wednesday afternoon, the euro was at $1.2658, down from $1.2674 late Tuesday, according to EBS via CQG. The dollar was at Y84.53, from Y84.15. The euro was at Y107.02 from Y106.64. The U.K. pound was at $1.5464 from $1.5433. The U.S. dollar was at CHF1.0279 from CHF1.0312, after falling as low as CHF1.0247.

The ICE Dollar Index, which tracks the dollar against a trade-weighted basket of currencies, was at 83.235 from 83.139.

U.S. data continued to come in under expectations, with new-home buying in the U.S. decreased in July to the level of sales on record going back to 1963. A slight rise in demand for U.S. manufactured durable goods was also well-under expectations.

The disappointing data raise anticipation for comments from Federal Reserve Chairman Ben Bernanke and international officials Friday at the Jackson Hole, Wyo., economic policy symposium held by the Federal Reserve Bank of Kansas City, said analysts. Investors are waiting to see whether the Federal Reserve will take action - such as further quantitative easing - to prop up the country's faltering recovery.

The commodity-backed dollar bloc suffered from the downbeat mood in markets, with the New Zealand dollar falling to a series of seven-week lows, and the Australian dollar trading at one-month lows. The Canadian dollar was down for the fifth consecutive day for the first time since January 2009, according to EBS.

Though a traditional safe haven, Japan didn't benefit from the sour mood due to increased "jawboning" by Japanese officials in response to the currency's 15-year high against the dollar and nine-year high against the euro hit Tuesday.

Japan moved closer to action to curb the surging yen, threatening to intervene in the currency market for the first time in more than six years, while the central bank may be set to ease monetary policy.

Japan "must take appropriate action when needed" to combat unwelcome moves in the yen, which have recently been "one-sided," Finance Minister Yoshihiko Noda told reporters before meeting with Prime Minister Naoto Kan to discuss the currency.

Meanwhile, the euro gave up its overnight gains and was down against the dollar as concerns about the financial health of countries on the periphery of the euro zone overshadowed a better-than-expected Ifo business sentiment reading out of Germany.

Fears about countries on the periphery of the euro zone were stoked when Standard & Poor's Ratings Services trimmed its rating on Ireland to AA- late Tuesday. The agency said the projected fiscal cost to the Irish government of supporting the hard-hit financial sector has increased significantly above prior estimates.

Investors also nervously watched as the Hungarian forint hit a new all-time low against the Swiss franc. Because as many as 70% of Hungarian households and over half of businesses have loans denominated in Swiss francs, the current exchange rates will increase loan repayment costs for many Hungarian borrowers and pose a potential threat to country's banks, said analysts.

-By Frances McInnis, Dow Jones Newswires; 212-416-3417; frances.mcinnis@dowjones.com

(Katie Martin and Clare Connaghan in London, and Takashi Nakamichi, Megumi Fujikawa and Tomoyuki Tachikawa in Tokyo contributed to this article.)

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