The Japanese yen declined to a five- month low against the dollar and the euro as stocks rallied on speculation the global financial crisis is easing, damping demand for the currency as a refuge. The yen fell against all of the 16 most-actively traded currencies, sliding against New Zealand’s dollar to the lowest since November, on expectations Federal Reserve Governor Kevin Warsh will signal today credit markets are thawing. The euro rose to a one-week high against the dollar on optimism a European Central Bank official will indicate slower rate cuts. “There’s a sense the global turmoil is easing, which is improving risk-taking 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 means the yen will likely weaken and currencies such as the euro and the pound will probably strengthen” in coming days, he said. The yen dropped to 136.64 per euro at 7:30 a.m. in London, from 135.26 late on April 3 in New York. It touched 137.07, the lowest since Oct. 17. Japan’s currency reached 100.93 against the U.S. dollar, the weakest since Oct. 21, from 100.31 last week. The euro advanced for a third day against the dollar, climbing to $1.3549 from $1.3486. New Zealand’s dollar rose as high as 60.35 yen, the strongest since Nov. 5, from 58.76 yen, as Federal Reserve Chairman Ben S. Bernanke said on April 3 programs to unfreeze credit markets “are having the intended effect.” Australia’s dollar strengthened to as much as 72.75 yen, the highest since Oct. 14, from 71.75 yen. VIX Falls The MSCI Index of regional shares advanced 0.6 percent and the Nikkei 225 Stock Average rose 1.2 percent. Toyota Motor Corp., the world’s largest automaker, gained 1.1 percent as the weaker yen helped boost the value of overseas sales. “Due to receding worries about risk aversion and emerging euphoria, people are now buying back stocks and higher-yielding currencies,” said Masahiro Sato, deputy general manager of the treasury department at Mizuho Trust & Banking Co., a unit of Japan’s second-largest bank. Fed Governor Warsh will speak on financial markets and the economy at 1 p.m. in Washington. The Bank of Japan, which started its two-day policy meeting today, will keep interest rates near zero, according to a Bloomberg survey of economists. North Korean Rocket The VIX index, a measure of market volatility known as Wall Street’s “fear gauge,” closed below 40 on April 3, the first time since January, indicating traders are becoming more confident about stock market advances. “The yen is the primary victim of wide-spread optimism about the global economy,” said Tomohiro Nishida, a currency dealer at Chuo Mitsui Trust & Banking Co. “The dollar also took a hit from the same development.” The yen lost more than 7 percent against the euro since the start of this year. Demand for the yen also weakened after North Korea launched a rocket yesterday over the Sea of Japan. “Geopolitical risk” may add to the yen’s decline, said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. The North Korean rocket flew over Japan on a trajectory into the Pacific Ocean, according to a statement from the Japanese Prime Minister’s Office. U.S. President Barack Obama said yesterday the firing of the Taepodong 2 was “provocative” and a “clear violation” of a United Nations Security Council resolution. Yield Advantage South Korea’s won rose 2.4 percent to 1,309.25 per dollar, extending four weeks of gains, as demand increased for emerging- market assets following the Group of 20’s decision last week to strengthen the International Monetary Fund. The euro strengthened on speculation European Central Bank Executive Board Member Lorenzo Bini Smaghi may signal in a speech today that the bank will slow the pace of rate cuts after lowering them last week. The yield advantage two-year German bunds hold over Japanese government bonds increased to 1.12 percentage points today, the most in two months, boosting the allure of assets in the 16-nation region. The ECB on April 2 cut its benchmark rate by a quarter-percentage point to 1.25 percent, compared with a half-point reduction expected in a Bloomberg survey. Bets on Euro “Investors seem to be focusing on rate differentials, so the fact that the ECB lowered rates by only 25 basis points is positive for the euro,” said Ryohei Muramatsu, manager of Group Treasury Asia in Tokyo at Commerzbank AG, Germany’s second- largest lender. “Investors also are becoming more inclined to take on risk, which is leading to euro appreciation.” The euro may rise to $1.3600 today, Muramatsu said. Benchmark rates are 0.1 percent in Japan, 0.5 percent in the U.K. and between zero and 0.25 percent in the U.S. ECB President Jean-Claude Trichet said on April 3 that the central bank’s target lending rate “could in a very measured way go down” from the 1.25 percent level. The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop -- so-called net longs -- was 2,265 on March 31, compared with net shorts of 5,458 a week earlier, figures from the Commodity Futures Trading Commission showed. It is the first time that speculators were net long the euro since July. Futures are agreements to buy or sell assets at a set price and date. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange as of each Tuesday. Analysts and investors often follow changes in speculators’ positions because such transactions can reflect an expectation of a change in prices.

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