BLBG: Yen Falls as Rising Stocks Spur Demand for High-Yield Assets
The yen fell against the euro as Asian stocks gained on optimism the worst of the global economic slump may be ending, spurring investors to increase purchases of higher-yielding assets.
The euro rose versus the dollar on speculation European Central Bank President Jean-Claude Trichet will signal the bank will refrain from cutting interest rates further after lowering them later today. The Australian dollar touched the highest in almost a week versus the greenback as the nation’s trade surplus unexpectedly widened, boosting the appeal of the currency.
“Asian and Japanese stocks are rising, reflecting an improvement in risk appetite,” said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co., a unit of Japan’s largest brokerage. “This is leading to selling of the yen.”
The yen dropped to 130.98 per euro as of 6:17 a.m. in London, from 130.52 in New York yesterday. Japan’s currency fell to 98.76 against the dollar from 98.53. The euro advanced to $1.3263 from $1.3249. Europe’s single currency was at 91.60 British pence from 91.59 pence. Australia’s dollar rose to 70.26 U.S. cents, from 69.93 cents yesterday.
The Nikkei 225 Stock Average rose 4.3 percent and the MSCI Asia-Pacific Index of regional shares advanced 4.6 percent. The Standard & Poor’s 500 Index climbed 1.7 percent yesterday.
Mitsubishi UFJ Financial Group Inc. climbed 6.3 percent after U.S. Treasury Secretary Timothy Geithner said there are “encouraging signs” in financial markets.
G20 Meeting
The Group of 20 summit convenes in London today to search for a global approach to ending the economic crisis as some reports suggest the pace of economic deterioration is easing.
U.S. durable-goods orders and home sales rose in February, Chinese urban investment surged 26.5 percent in the first two months of the year, and German investor confidence in March reached its highest level since July 2007. The Standard & Poor’s 500 Index last month rallied the most in seven years.
“Despite less negative data the pressure on global leaders at the G-20 meeting to act remains intense,” Mitul Kotecha, head of global foreign-exchange strategy at Calyon in Hong Kong wrote in a report today. “Any significant agreement on the enhanced role of the International Monetary Fund could fuel the appetite for risk in the short term.”
Japanese investors were net buyers of foreign bonds for a third straight week, purchasing 663.1 billion yen ($6.1 billion) during the week ended March 28, according to figures released by the Ministry of Finance in Tokyo today.
‘Buy Foreign Assets’
“Last week’s aggressive purchases of foreign bonds by Japanese investors probably reflected their interest in buying on weakness,” said Tomoko Fujii, a rates and currency strategist at Banc of America Securities-Merrill Lynch Japan, said in a Bloomberg Television interview. “We saw a sudden yen appreciation last week, so that created an opportunity to buy foreign assets.”
Japan’s benchmark interest rate is 0.1 percent, compared with 3.25 percent in Australia, 3 percent in New Zealand and 11.25 percent in Brazil, encouraging domestic investors to seek higher returns abroad.
The euro strengthened against the yen on speculation assets in the 16-nation region will maintain their yield advantage over those in Japan even if the ECB reduces borrowing costs today.
The ECB will cut its benchmark to 1 percent from 1.5 percent today, according to a Bloomberg survey. ECB council member Axel Weber said last month that the central bank shouldn’t cut rates below one percent.
ECB Policy
“The ECB is likely to indicate it won’t lower borrowing costs further,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “This is positive for the euro,” which may rise to 141.99 per yen and $1.3299 today, he said.
Australia’s dollar also climbed against 13 of the 16 major currency after the Australian newspaper reported that Prime Minister Kevin Rudd plans a third round of economic stimulus in next month’s budget.
The nation’s trade surplus expanded to A$2.11 billion ($1.5 billion) from a revised A$926 million in January, the Bureau of Statistics said in Sydney today. The median estimate of economists surveyed by Bloomberg News was for A$700 million.
“The trade surplus was a surprise on the topside and that gave a boost to the share market and the Aussie dollar,” said Timothy Connors, head of foreign exchange at Custom House Global Foreign Exchange in Sydney. The currency may advance toward 72.50 U.S. cents over the next week, he said.
