2/27/2009 2:58 PM: EUR/$..1.2696 $/JPY..97.82 GBP/$..1.4321 $/CHF..1.1683 AUD/$..0.6428 $/CAD..1.2687

USD Jumps Higher as Safe Haven Currency by Korman Tam

The greenback extended its gains versus the yen in the Friday session, while also edging higher against the euro and sterling. Dismal US data and renewed fears of bank nationalization prompted safe haven flows into the dollar.

Economic reports released earlier in the session pointed to a deepening US recession, with Q4 GDP posting an annualized 6.2% contraction – its steepest decline since 1982. The growth figures were considerably worse than both expectations at -5.4% and -3.8% previously. The Q4 PCE prices declined by 5.0% from a 5.5% decline in the prior reading while GDP sales fell by 6.4%, larger than calls for a 5.9% decline versus a 5.1% drop previously. Chicago PMI unexpectedly improved in February rising to 34.2 versus forecasts for a decline to 33.0 from 33.3 in January. The final reading for the February University of Michigan consumer sentiment survey improved from the preliminary reading at 49.1 to 50.5, albeit worse than the January report at 57.8

The US equity market recovered somewhat from earlier steep losses following news that the government would convert its preferred shares of Citigroup into common equity to give it up to 36% stake in the bank. News of the partial nationalization sent the Dow Jones sharply lower in the morning, plunging to just above the key 7,000-level at 7,033.62.