BLBG: Yen Falls Versus Dollar, Euro as Japan’s Recession May Deepen
The yen fell, approaching a one- week low against the dollar on speculation government reports will show Japan’s recession is deepening, reducing demand for the currency as a refuge from world financial turmoil.
The Australian and New Zealand dollars gained against the yen as Asian stocks extended a global rally, spurring investors to seek higher-yielding assets. The euro fell versus 13 of the 16 major currencies as the Wall Street Journal reported that Banque AIG, a unit of American International Group Inc.’s Financial Products division, may face defaults on $234 billion of derivatives after two executives in Paris stepped down.
“Incoming data are likely to confirm the poor state of the Japanese economy,” said Hiroshi Maeba, deputy managing director of foreign-exchange trading in Tokyo at Nomura Securities Co., a unit of Japan’s biggest brokerage by assets. “The yen may be sold on weak data.”
The yen fell to 97.81 against the dollar as of 12:51 p.m. in Tokyo from 97.54 late in New York yesterday. It reached 98.58 on March 24, the lowest level since March 18. The currency was at 132.70 per euro from 132.48. It touched 134.51 on March 24, the weakest since Oct. 21.
The dollar traded at $1.3570 per euro from $1.3583, and was at $1.4592 versus the British pound from $1.4552. The Australian dollar climbed to 68.40 yen from 68.05 yen, and the New Zealand currency gained to 56.06 yen from 55.20 yen.
The yen weakened against 15 of the 16 most-active currencies today before a trade ministry report tomorrow that may show retail sales declined for a sixth straight month.
Sales fell 3 percent in February from a year earlier, after declining 2.4 percent the prior month, according to a Bloomberg News survey of economists. Consumer spending accounts for nearly 55 percent of the nation’s gross domestic product.
Stocks Advance
Higher-yielding currencies strengthened against the yen and the dollar after Asian and U.S. equities gained on optimism the worst of the global financial turmoil may be over.
The MSCI Asia Pacific Index of regional shares rose 0.7 percent after the Standard & Poor’s 500 Index gained 1 percent yesterday. The S&P 500 has advanced almost 11 percent in March, set for its best advance since 1991.
“Extreme pessimism about the global economy is receding,“ said Yousuke Hosokawa, a senior currency dealer in Tokyo at Chuo Mitsui Trust and Banking Co. “This is making investors more active and they feel like buying riskier assets.”
Gains in the euro may be curbed on speculation that credit- market losses at European financial institutions will worsen.
Derivative Contracts
Banque AIG employees Mauro Gabriele and James Shephard resigned in recent days and AIG must find replacements who are approved by French banking regulators to avoid facing defaults tied to clauses in the derivative contracts, the WSJ reported yesterday, citing unidentified people and an AIG document provided to the U.S. Treasury.
“The implications from the report are that European banks could be forced to take responsibility for billions of dollars in derivatives trades,” said Lee Wai Tuck, a currency strategist at Forecast Pte Ltd. in Singapore. “This report appears to have triggered selling of the euro,” which may weaken further to $1.35 and 132 yen today, he said.
The Dollar Index may fall for a second day on concern Federal Reserve officials speaking today will indicate the central bank is determined to keep borrowing costs low to revive the world’s biggest economy.
San Francisco Fed President Janet Yellen said yesterday there are “severe” risks warranting whatever policies are needed to revive growth. These comments may be echoed by Dallas Fed President Richard Fisher, who speaks at 12 p.m. in Dayton, Ohio, and Richmond Fed President Jeffrey Lacker who talks at 12:30 p.m. in Charleston, South Carolina.
The Fed said last week it would buy as much as $300 billion of Treasuries and more than double purchases of housing debt to $1.45 trillion, hoping to reduce rates on home loans.
The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, was little changed at 83.790.
