The Japanese yen and Swiss franc rose on Friday as a fiscal stimulus package failed to ease U.S. recession fears, prompting investors to sell stocks and higher-yielding currencies. The greenback retreated against the Japanese unit from 107.60 to 106.51 on cross unwinding in jpy and closed at 106.87. U.S. currency weakened versus Swiss franc from 1.1064 to 1.0979.

The White House said President George W. Bush wants a stimulus package of about 1% of U.S. gross domestic product with the focus on broad tax cuts rather than government spending. The greenback pared gains against major currencies after the news. Bush said a stimulus package is the most important economic priority and stimulus should include direct and rapid income tax relief for families. He said the package should be temporary and take effect right away.

U.S. Treasury Secretary Henry Paulson the government was considering a $140 billion to $150 billion stimulus package and said the Bush administration and Congress should work together to quickly pass a fiscal stimulus package that boosts consumer spending and spurs business investment. However, he declined to give specifics on the stimulus package under discussion. White House's Lazear said fiscal stimulus plan could help produce 500,000 this year.

Fed's Lacker said recent data has made him more willing to contemplate a rate cut although inflation is still higher than he would like. Lacker lowered his growth forecast for 2008 since December employment report. The greenback retreated against major currencies after his comments

Australian dollar rallied to a high of 0.8854 on the comments from Australia Cenbank Governor Stevens who said the strength of Australian dollar as it was helping to keep inflation pressures under control, however, the pair retreated to 0.8751 later in the day due to cross selling especially the Japanese yen on the renewed selloff in U.S. stocks. The British pound tumbled from 1.9727 to 1.9513 as U.K. retail sales data came in at a decrease of 0.4% versus economists forecast of an increase of 0.2%.

Next week will see the release of U.K. Rightmove house prices, Japan’s leading indicators, German PPI on Monday; Bank of Japan report and U.K. CBI industrial trend on Tuesday; eurozone PMI manufacturing, U.K. GDP, BOE meeting minutes, eurozone industrial orders on Wednesday; Japan’s trade balance, German Ifo index, U.S. jobless claims and existing home sales on Thursday; and Japan’s Tokyo CPI, BOJ minutes and German Gfk index on Friday.