By Yoshiaki Nohara and Ron Harui April 19 (Bloomberg) -- The yen rose versus the euro for a third day on speculation investors are buying Japan’s currency as a refuge against concerns that probes into Goldman Sachs Group Inc. will widen and Greece’s aid package may falter. The yen gained against all of its 16 major counterparts after U.K. Prime Minister Gordon Brown yesterday called for an investigation into Goldman Sachs, while German regulators asked the U.S. Securities and Exchange Commission for details on its suit filed against the bank last week. The euro fell to a one- week low against the dollar after European Union finance ministers told Greece to brace itself for the International Monetary Fund’s conditions on a bailout package. “German and U.K. regulatory bodies are being sent to investigate Goldman, and that is extending the news risk,” said Greg Gibbs, a foreign-exchange strategist at Royal Bank of Scotland Group Plc in Sydney. “Greece’s contagion is increasing risks. Cross-yen is coming off clearly.” The yen rose to 123.84 per euro as of 1:24 p.m. in Tokyo from 124.44 in New York on April 16. The Japanese currency was at 92 per dollar from 92.17 after touching 91.82, the strongest since March 25. The euro fell to $1.3460 from $1.3503 after reaching $1.3446, the weakest since April 9. The SEC said last week that, in early 2007, Goldman Sachs created and sold a collateralized debt obligation linked to subprime mortgages without disclosing that hedge fund Paulson & Co. helped pick the underlying securities and bet against the vehicle, known as Abacus 2007-AC1. The firm denies any wrongdoing. ‘Moral Bankruptcy’ Brown said he was “shocked” at the “moral bankruptcy” indicated in the suit. The German government “will ask the SEC for information,” said Ulrich Wilhelm, a spokesman for Chancellor Angela Merkel. “Then we will look at the records and consider possible legal steps.” The euro fell against the dollar as concern Greece will activate an EU-led 45 billion euro ($60.6 billion) emergency- loan package damped demand for the European currency. Talks on Greece involving the European Commission, the IMF and the European Central Bank were delayed to April 21 from today because of the volcanic ash cloud disrupting air travel. The premium of Greek 10-year bonds over similar-maturity German bunds widened 30 basis points to 430 basis points on April 16. Greece needs to raise 11.6 billion euros by the end of May. A bigger gap between the yields indicates perceptions of higher risk for Greece. ‘Remain Wary’ “Investors remain wary the country can roll over its debts without external assistance,” Mansoor Mohi-uddin, chief currency strategist in Singapore at UBS AG, wrote in an e-mail yesterday. “We continue to see the euro falling back to $1.30 over the next three months.” Gains in the yen were tempered on speculation Japanese importers took advantage of its rally to a three-week high to sell the currency. Japan’s large manufacturers expect the yen to average 91 per dollar this fiscal year, according to the Bank of Japan’s most recent Tankan survey. “There’s talk that importers are selling the yen,” said Takashi Kudo, general manager of market information at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp., in Tokyo. “The currency’s surge to multi-week highs versus the dollar and the euro may be appealing to them.” Malaysia’s ringgit led Asian currencies lower as Asian stocks tumbled on the probe of Goldman Sachs. ‘Risk Sentiment’ “The case affected risk sentiment and flattened the currencies in the region,” said Sim Moh Siong, a foreign- exchange strategist at Bank of Singapore Ltd. “It opened up issues about conflict of interest and created some regulatory uncertainty in the financial industry.” The ringgit dropped 0.8 percent to 3.2174 per dollar. The MSCI Asia Pacific Index of regional shares declined 1.8 percent and the Nikkei 225 Stock Average fell 1.6 percent, The Australian dollar’s push to parity with the U.S. dollar is in jeopardy as central bankers signal they may slow the pace of interest-rate increases and China moves closer to revaluing the yuan. After rallying 28 percent the past 12 months, more than any other currency tracked by Bloomberg, Morgan Stanley predicts the Aussie may tumble 16 percent by year-end because higher borrowing costs will curb growth. Barclays Capital, which in December forecast a peak of $1 in 2010, now expects the Australian dollar to be the biggest loser from what it calls a “significant” yuan revaluation. The currency is “fully priced,” said Scott Ainsbury, a New York-based money manager who helps invest about $9 billion at FX Concepts Inc., the world’s biggest foreign-exchange hedge fund. “It’s probably time to lighten up,” he said. The Aussie may weaken about 3 percent before rising by year-end. Australia’s dollar declined 0.6 percent to 91.92 U.S. cents, and slipped 0.7 percent to 84.56 yen. To contact the reporters on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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