Japanese Yen dips against U.S. Dollar; falls to four-week lows versus Euro.

Rising U.S. stock prices emboldened global investors, prompting them to take advantage of low interest rates in Japan to borrow money for investment in higher yielding investments elsewhere. Carry trade flows drove the Yen lower across the board, but especially against the Euro and both the Australian and New Zealand Dollars.

The Euro gave up some of its gains from Friday and Monday after negative reports from Germany and France undermined optimism about the health of the European economy. German Consumer Confidence fell more than expected and an index of sentiment among French manufacturers fell to its lowest level since December 2005. Since Germany and France are the largest economies in the European Union, their fortunes often harbinger the fate of the Euro-zone as a whole. However, the news wasn’t all bad for the Euro – consumer prices in the Euro-zone rose 3.5% in May, faster than the previous month and still well above the European Central Bank’s tolerance zone – which leaves the possibility of European interest rate cuts still seem like a shaky proposition.

The British Pound weakened against most of the major currencies this morning as the slumping U.K. housing market continues to sap enthusiasm for the British economy. After rebounding to three-week highs against the U.S. Dollar, the Pound was back on the defensive after it was reported that over twenty-percent of British homebuyers with poor credit histories were falling behind on their payments in the first quarter. The British economy grew at its slowest pace in three years during the first quarter, and Cable has weakened 8.6% against the Euro and 0.6% against the U.S. Dollar so far this year.

The demand for higher yields helped push both the Australian and New Zealand Dollars higher this morning. The Aussie Dollar rallied to quarter-century highs as high interest rates and a healthy outlook lured investors. The New Zealand Dollar, which had fallen out of favor a few weeks ago as investors feared the central bank would cut rates, has found new life since the government introduced a stimulus package built around tax reductions which investors believe will forestall the need for the Reserve Bank to cut interest rates.