Market Movers

The Japanese yen rose against the euro and the dollar as traders sought refuge in the currency amid concern the U.S. fiscal stimulus plan will meet Senate resistance and widening credit losses will erode earnings.

The euro fell toward an eight-week low against the dollar after a report showed retail sales declined more than economists forecast, supporting the case for the European Central Bank to cut its key interest rate tomorrow. The British pound weakened versus the U.S. currency as an industry report showed U.K. services shrank for a ninth month.

President Barack Obama will announce today that he’s imposing a cap of $500,000 on the compensation of top executives at companies that receive significant federal assistance in the future, responding to a public outcry over Wall Street excess.

Any additional compensation will be in restricted stock that won’t vest until taxpayers have been paid back, according to an administration official, who requested anonymity. The rules will force greater transparency on the use of corporate jets, office renovations and holiday parties as well as golden parachutes offered to executives when they leave companies.

U.S. Senate Republicans on Tuesday offered their own, cheaper economic stimulus plans focused on tax cuts, pushing back against a $900 billion Democratic plan they say encourages too much new spending.

As the Democratic-controlled Senate began thrashing out possible changes to the rescue package President Barack Obama has sought, Republicans indicated they may play hardball ahead of a vote that will require at least some Republican support.

“The American people are beginning to figure out what this package is, that it’s not a stimulus package — it’s a spending package,” said Senator John McCain, an Arizona Republican who lost to Obama in the 2008 presidential election.

Senators worked throughout the day to seek a bipartisan deal. McCain and four other Republicans unveiled their ideas priced at $445 billion, half the cost of Democratic version which started the day at $885 billion.

It centered on cutting in half a 6.2 percent payroll tax on employees, reducing the corporate tax rate to 25 percent from 35 percent and lowering the bottom two income tax brackets to 10 percent and 5 percent, all for one year.

McCain and Senators Lindsey Graham of South Carolina, John Thune of South Dakota, Richard Burr of North Carolina and Mel Martinez of Florida also proposed $11 billion to help prevent home foreclosures and $65 billion in state grants to build and repair bridges and roads.

Obama wants legislation to jump-start the ailing economy will be on his desk for signing into law by February 16 and there appeared to be strong public support for Congress to act. “We can’t afford to wait,” Obama told Fox News.

But how — and with how much money — remain subjects of contentious debate.

“We have a lot to do in just a little bit of time,” said Senate Majority Leader Harry Reid. He has said Democrats would consider Republican ideas but want to pass the bill by Friday.

Two Senate moderates, Nebraska Democratic Senator Ben Nelson and Maine Republican Senator Susan Collins, were working to cut some spending measures that have been criticized as ineffective and shift money to more construction projects.

The Obama administration, aiming to overhaul the $700 billion financial-rescue program, is refocusing on an effort to guarantee illiquid assets against losses without taking them off banks’ balance sheets.

Treasury Secretary Timothy Geithner is skeptical of setting up a so-called bad bank to hold the toxic securities, an option that still may form part of the final package, people familiar with the matter said. Senator Charles Schumer yesterday said debt guarantees are becoming “a favorite choice” of options because a bad bank would be too costly.

The debate comes as some former officials warn against measures that stop short of stripping banks of the illiquid investments tied to mortgages and related securities. Government protection for $400 billion of Citigroup Inc. and Bank of America Corp. assets hasn’t sparked investor confidence in the firms’ viability.