BLBG: Yen Gains as Recession Outlook Spurs Sales of High-Yield Assets
By Stanley White and Ron Harui
Oct. 16 (Bloomberg) -- The yen rose, nearing a three-year high versus the euro, as a drop in stocks prompted investors to sell higher-yielding assets including Europe's single currency.
Japan's currency also gained the most in a week against the Australian dollar as the outlook for slowing global growth caused commodities prices to tumble. The dollar rose toward its strongest level in more than a year versus the euro on speculation turmoil in financial markets will encourage investors to buy Treasuries.
``We're not in an environment where you can take on risk, and that supports a stronger yen,'' said Osao Iizuka, head of foreign-exchange trading in Tokyo at Sumitomo Trust & Banking Co., Japan's seventh-largest publicly listed lender. ``Stock markets keep on falling because there's good reason to expect economic growth to deteriorate.''
The yen rose to 133.82 per euro at 1:42 p.m. from 134.93 late yesterday in New York. It climbed to 132.24 on Oct. 10, the strongest level since June 2005. The dollar advanced to $1.3362 per euro from $1.3499. It reached $1.3259 on Oct. 10, the strongest since March 2007. The dollar was quoted at 100.08 yen from 99.96 yen. The yen may rise to 132 versus the euro today, Iizuka forecast.
Against the Australian dollar, the yen jumped 7.1 percent from late yesterday in Asia to 66.89. Japan's currency also rose 4 percent to 60.91 per New Zealand dollar and 14 percent versus the South African rand to 9.6312.
Carry Trades
The yen gained on speculation investors will pare carry trades, in which they get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent benchmark rate compares with 3.75 percent in Europe, 6 percent in Australia, 7.5 percent in New Zealand and 12 percent in South Africa.
The Nikkei 225 Stock Average percent plunged as much as 10 percent and U.S. stocks tumbled the most since the crash of 1987 after a U.S. government report showed retail sales last month dropped the most in three years. Crude oil slumped to a 13-month low and prices of metals including copper and gold also declined.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.netRon Harui in Singapore at rharui@bloomberg.net
