BLBG: Yen Advances as Drop in U.S. Stocks Reduces Demand for Risk
By Ben Levisohn and Oliver Biggadike
April 13 (Bloomberg) -- The yen rose against the Australian and New Zealand dollars as a drop in U.S. stocks discouraged demand for higher-yielding assets.
The euro fell against the yen for the first time in four days as Greece’s government debt yields rose on concern a rescue package for the debt-stricken nation will fall short.
“Equities are not trading well,” said Richard Franulovich, a senior currency strategist at Westpac Banking Corp. in New York. “That tends to filter through to a weaker Aussie, a weaker kiwi.”
The yen climbed 0.2 percent to 126.49 against the euro at 12:08 p.m. in New York, from 126.74 yesterday. The yen traded at 93.15 versus the dollar, compared with 93.24. The euro fetched $1.3579, compared with $1.3592.
Japan’s currency advanced 0.2 percent to 86.30 against the Australian dollar and climbed by the same amount to 66.28 versus the New Zealand dollar on speculation investors will reduce carry trades, in which they buy higher-yielding assets with amounts borrowed in nations with low interest rates. The benchmark of 0.1 percent in Japan has made the yen popular for funding such transactions.
The Dow Jones Industrial Average dropped 0.1 percent after closing above 11,000 yesterday for the first time since September 2008.
Euro-region finance ministers said on April 11 they would offer Greece as much as 30 billion euros in three-year loans in 2010 at about 5 percent interest. Another 15 billion euros would be provided by the International Monetary Fund.
Greece’s Debt
Mounting concern that Greece will be unable to finance a budget deficit that is more than four times the European Union’s limit of 3 percent of gross domestic product drove the euro almost 5 percent lower this year through April 9, according to Bloomberg Correlation-Weighted Currency Indexes.
Greece’s auction of Treasury bills today drew stronger demand than at a previous sale.
The government sold 780 million euros ($1.06 billion) of 26-week bills at a yield of 4.55 percent, attracting bids for 7.67 times the securities offered. Greece also offered 780 million euros of 52-week securities at a yield of 4.85 percent, with a bid-to-cover ratio of 6.54 times.
Deteriorating sentiment toward Greek debt led to the lowest demand in a year at 26- and 52-week bill sales in January, when the debt agency raised 3.7 billion euros from the auctions, which included a 13-week security.
U.S. Trade Deficit
The dollar fell earlier against the yen after the Commerce Department reported that the U.S. trade deficit widened in February more than economists forecast.
The gap increased to $39.7 billion in February from a revised $37 billion in the previous month as import demand grew. The median forecast of 73 economists in a Bloomberg News survey was for a rise in the deficit to $38.5 billion from a previously reported $37.3 billion.
Sterling traded near its highest level versus the dollar since February as the Office for National Statistics reported that exports surged 9.5 percent, helping to cut the trade deficit to 6.2 billion pounds ($9.5 billion), the least since June 2006.
The pound was at $1.5367 after reaching $1.5486 yesterday, the highest level since Feb. 23. It traded at 88.39 pence against the euro.
Bank of Japan
The yen earlier traded higher after Bank of Japan Governor Masaaki Shirakawa said the central bank is seeing brighter signs for prices, an indication policy makers may raise their inflation forecasts this month.
“We’re starting to see more positive signs than negative signs,” the governor said at a parliamentary committee today in Tokyo. Improvements in consumer prices typically lag behind the narrowing of the demand gap by a year, he said.
Lingering deflation prompted Shirakawa and his board to double a bank lending program to 20 trillion yen ($214 billion) in March.
China’s President Hu Jintao told President Barack Obama yesterday in Washington that China won’t yield to “external pressure” in deciding when to strengthen the yuan.
Twelve-month non-deliverable yuan forwards declined 0.1 percent to 6.6315 per dollar, from 6.6237. The contracts reflect bets the currency will strengthen 2.8 percent from the spot rate of 6.8256.
To contact the reporters on this story: Ben Levisohn in New York at blevisohn@bloomberg.net; Oliver Biggadike in New York at obiggadike@bloomberg.net
