BLBG; Yen Rises on Speculation Investors Sold High-Yielding Assets
By Stanley White and Ron Harui
Nov. 20 (Bloomberg) -- The yen rose for a second day against the dollar and the euro on speculation a plunge in global stocks prompted investors to sell higher-yielding assets and pay back low-cost loans from Japan.
The yen gained for a fourth day versus Brazil's real and a second against South Africa's rand on bets the deepening economic slump will discourage so-called carry trades. The South Korean won slid to the lowest level in more than 10 years as investors shunned emerging-market assets.
``All the atmospherics suggest that the economic impact from the financial dislocations in recent months is quite intense and quite widespread,'' said Tony Morriss, a senior currency strategist at Australia & New Zealand Banking Group in Sydney. ``Risk dynamics are still at work. It's quite clear the yen is going to outperform.''
The yen rose to 95.21 against the dollar as of 1:49 p.m. in Tokyo from 95.73 late yesterday in New York. It was at 118.99 versus the euro from 119.55. The dollar was at $1.2483 per euro from $1.2489. The currency may advance to 94.50 versus the dollar and 117.65 per euro over the next couple of days, Morriss said.
Korea's won slumped to 1,515.05 per dollar, the weakest level since 1998, as investors stepped up sales of the nation's shares after U.S. stocks sank to a five-year low. The won is down 37 percent this year, Asia's worst performer ahead of Indonesia's rupiah among the 10 most-traded regional currencies, excluding the yen.
In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the two. The risk is that currency market moves erase those profits. Japan's 0.3 percent target lending rate compares with 13.75 percent in Brazil, 12 percent in South Africa and 4 percent in South Korea.
Japan's Nikkei 225 Stock Average slipped 5.9 percent and the MSCI Asia-Pacific Index of regional shares fell 4.7 percent after Standard & Poor's 500 Index dropped 6.1 percent yesterday to its lowest close since 2003.
To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.net
