By Kim-Mai Cutler Dec. 10 (Bloomberg) -- The yen fell versus the euro and the dollar as U.S. stock futures rose and traders bet government efforts to cushion a global economic slump will encourage Japanese investors to buy overseas assets with higher yields. The yen also declined versus the Australian and New Zealand dollars after Congressional Democrats and U.S. President George W. Bush’s administration agreed on the outlines of a $15 billion plan to give General Motors Corp. and Chrysler LLC federal loans. South Korea’s won had its biggest gain in six weeks. “Stocks have obviously rebounded quite hard overnight, which is pushing the yen downward,” said Adam Cole, global head of foreign-exchange strategy at the Royal Bank of Canada in London. “This is a global risk-appetite story and really not much else.” Japan’s currency weakened to 119.92 per euro as of 7:52 a.m. in New York, from 119.07 yesterday. Against the dollar, it depreciated to 92.67, from 92.13. It rose to 91.60 on Dec. 5, the highest level since Oct. 24. The euro rose 0.1 percent against the dollar to $1.2942. Against the Australian dollar, the yen weakened to 61.10 from 60.69 yesterday. It also fell 1.2 percent to 50.57 per New Zealand dollar. Japan’s 0.3 percent target interest rate is the lowest among developed nations and compares with 4.25 percent in Australia and 5 percent in New Zealand. Currency Intervention The yen extended declines after Bank of Japan Governor Masaaki Shirakawa told lawmakers today the country’s Finance Ministry has the option of intervening to stem abrupt currency moves. The central bank is also closely watching the yen’s affect on the economy and taking that into account when deciding monetary policy, he said. “Foreign-exchange rates sometimes show excessive moves, and the Ministry of Finance has the option to intervene in the market to counter them,” Shirakawa said when asked about how policy makers can alleviate the effect of a stronger currency on exporters. Central banks intervene in foreign-exchange markets by arranging the purchase and sale of currencies. The yen may be “among the most overvalued currencies” wrote Dwyfor Evans, a Hong Kong-based currency analyst with State Street Global Markets. Evans said investors should buy dollars and sell yen. “The yen is uniquely exposed to any further improvement in sentiment, especially since institutional investors currently hold an extended long yen position,” he wrote. Stock Gains The MSCI Asia-Pacific index of regional shares rose 3.3 percent. Futures on the S&P 500 index added 1.2 percent. The S&P index this week marked a technical end to a 14-month bear market as U.S. President-elect Barack Obama stepped up efforts to pull the economy out of a recession, pledging the biggest public- works spending since the 1950s. The Korean won jumped 3.7 percent to 1,393.65 per dollar as the Kospi stock index added 3.6 percent, a fourth day of gains. Treasury 10-year notes fell, snapping a U.S. government- debt rally that pushed three-month bill rates below zero. Japanese notes also dropped as stock gains cut demand for debt. The yen may strengthen to 90 per dollar should the yield on the U.S. two-year Treasury note decline to less than 0.6 percent, JPMorgan Chase & Co. said today in research based on correlation analysis. The yield today was at 0.89 percent. Weak ‘Bias’ U.S. lawmakers and the White House agreed to auto legislation “in concept,” a senior administration official said yesterday. The bill would include protection for taxpayers’ money, including the appointment of a so-called car czar who could force the companies into bankruptcy if they don’t come up with their own restructuring plans by March 31, the official told reporters on condition of anonymity. “The yen’s bias is to weaken,” said Tetsu Aikawa, deputy general manager of the capital markets division at Shinsei Bank Ltd. in Tokyo. “Stock markets are showing signs of stability, and that will encourage investors to take on risk.” The yen may fall to 93 per dollar and 120.50 against the euro today, Aikawa said. Japanese investors bought 240.1 billion yen ($2.6 billion) more in overseas bonds, stocks and short-term securities than they sold in the week ended Nov. 29, the fifth consecutive week of net purchases, Finance Ministry data show. Buying Potential The yen gained this year against all 178 currencies tracked by Bloomberg. Japan’s currency appreciated 21 percent versus the dollar, 36 percent against the euro and 70 percent versus New Zealand’s dollar this year. It’s headed for the first annual gain versus Brazil’s real, the euro and the New Zealand dollar in at least six years. “Deleveraging is not fully done in the financial industry,” said Benedikt Germanier, a currency strategist at UBS AG in Stamford, Connecticut, who predicted the yen may appreciate to 90 per dollar in a month. “The yen still has buying potential.” Implied volatility on one-month dollar-yen options fell the most in two weeks to 18.98 percent, up from 11.45 percent at the end of last year, indicating investors expect more currency fluctuations. Volatility jumped to 41.79 percent on Oct. 24, the highest level since Bloomberg started compiling the data in 1995. The stronger yen eroded Japanese exporters’ revenue. Sony Corp., the world’s second-biggest consumer-electronics maker, said yesterday it plans to eliminate 16,000 jobs. It said on Oct. 23 that net income will probably drop 59 percent in the year ending March 31. The dollar gained 34 percent versus the pound this year and 13 percent against the euro as the credit-market seizure and $980 billion of losses on mortgage-related securities worldwide led investors to repatriate overseas investment to the U.S. and seek shelter in Treasuries. The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, fell 0.2 percent to 85.687 today. It touched 88.463 on Nov. 21, the highest since April 2006. To contact the reporters on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net;

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