BLBG: Yen Falls as Stock Gains, Bank Bailouts Increase Risk Appetite
The yen fell the most in a month against the euro on speculation stock gains and measures to stabilize the U.S. financial system will encourage investors to buy higher-yielding assets funded in Japan’s currency.
The yen also weakened versus the Australian and New Zealand dollars and South Africa’s rand as the U.S. government agreed to invest $20 billion more into Bank of America Corp. and offer protection on $118 billion of its assets. The U.S. Senate voted yesterday to release the second half of a $700 billion financial rescue package to U.S. President-elect Barack Obama, easing concern that losses at financial institutions will spread.
“A lot of people, myself included, are trying to buy the euro against the yen,” said Motonari Ogawa, director of currency trading in Tokyo at Barclays Capital Inc., the fourth- largest U.K. lender. “Stocks are on a firm footing, and that increases appetite for risk.”
The yen weakened to 119.51 per euro as of 2:40 p.m. in Tokyo from 117.87 late yesterday in New York. The dollar rose to 90.41 yen from 89.84 yen. The euro bought $1.3218 from $1.3115.
Against the Australian dollar, the yen slipped to 60.85 from 59.55 late yesterday in New York. Japan’s currency also fell to 49.42 versus New Zealand’s dollar from 48.28. The yen weakened to 9.1066 per South African rand from 8.9936. Benchmark interest rates are 4.25 percent in Australia, 5 percent in New Zealand, 11.5 percent in South Africa and 0.1 percent in Japan.
Stock Gains
The MSCI Asia-Pacific Index of regional shares rose 2.1 percent and the Nikkei 225 Stock Average gained 3 percent. Standard & Poor’s 500 Index futures advanced 1 percent.
The U.S. government agreed to invest in Bank of America “as part of its commitment to support financial-market stability,” the Treasury, Federal Reserve and Federal Deposit Insurance Corp. said today in a joint e-mailed statement.
BOA, the country’s biggest bank by assets, moved forward its quarterly earnings report to today. The world’s largest banks have posted losses and writedowns of about $1 trillion since the start of 2007 on mortgage-related securities, according to data compiled by Bloomberg.
The U.S. government will use as much as $100 billion to ease the housing crisis and stabilize the financial system, Lawrence Summers, economic adviser for Obama, said yesterday. The president-elect takes office on Jan. 20.
The outgoing administration of President George W. Bush spent most of the first half of the financial-rescue package buying stakes in banks.
Market ‘Buzzing’
“The market has been buzzing since late yesterday with speculation about the government putting more money into BOA,” said Masahiro Sato, joint general manager of the treasury division in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest publicly listed lender. “This is behind the broad-based declines in the yen.”
The euro fell 1.9 percent against the dollar this week and is heading for the third weekly loss, its longest losing streak in almost two months, after European Central Bank President Jean-Claude Trichet signaled he may cut interest rates further.
“We didn’t say that it was now the limit and we wouldn’t move any more,” Trichet told reporters in Frankfurt yesterday after the central bank lowered its main refinancing rate by a half-percentage point to 2 percent, matching a record low.
The central bank isn’t planning to cut borrowing costs to zero percent, Trichet said in an interview with Japanese public broadcaster NHK.
Overseas Buyers
The dollar may extend gains versus the yen on speculation overseas investors are seeking the relative safety of Treasuries as an economic slowdown spreads across the world.
Foreign investors bought $15 billion more long-term U.S. stocks, notes and bonds than they sold in November, 10 times more than the previous month, according to a Bloomberg News survey. The Treasury Department will release the data at 9 a.m. in Washington today.
“Treasuries are a kind of safe haven,” said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland in Tokyo and a former Bank of Japan currency trader. “Foreigners’ net purchases may continue in the short term and be an additional factor for the dollar to rise.”
