By Yasuhiko Seki and Ron Harui Aug. 30 (Bloomberg) -- The yen rose against the dollar on speculation the Bank of Japan’s decision to increase credit- easing measures won’t be enough to weaken the Asian nation’s currency from near a 15-year high. The yen snapped three days of losses versus the euro after the BOJ expanded a bank loan program by 10 trillion yen ($116 billion), falling short of expectations it would unveil more steps, such as buying Japanese government debt, to support the economic recovery. The won rose the most in two weeks, leading Asian currencies higher, on optimism stimulus measures at home and in the U.S. will buoy economic growth and exports. “Announced measures came perfectly in line with market expectations and contained nothing beyond them,” said Kimihiko Tomita, head of foreign exchange in Tokyo at State Street Bank & Trust Co., a unit of the world’s largest money manager for institutions. “These steps essentially won’t halt the yen’s rise.” The yen climbed to 84.96 per dollar as of 7:33 a.m. in London from 85.22 in New York last week, after earlier declining to 85.91, the weakest since Aug. 19. The currency rose to 108.19 per euro from 108.72, after touching 109.56, the least since Aug. 20. The dollar advanced to $1.2735 per euro from $1.2763. BOJ Action The Bank of Japan kept its benchmark overnight lending rate at 0.1 percent at an emergency meeting today, and said it will boost the amount of funds in a lending facility to a total of 30 trillion yen. The decision came after Prime Minister Naoto Kan, who is compiling his own stimulus measures to spur growth, said Aug. 27 he expects the bank to implement policy “swiftly.” BOJ Governor Masaaki Shirakawa returned to Tokyo yesterday from a Federal Reserve symposium in Jackson Hole, Wyoming, a day ahead of schedule. “The BOJ didn’t go beyond the market’s expectations, such as buying more government bonds, disappointing investors,” said Takuya Kawabata, a researcher in Tokyo at Gaitame.Com Research Institute Ltd., a unit of Japan’s largest foreign-exchange margin company. “As a result, cross currencies are paring gains against the yen.” Pressure on the bank has been mounting since it kept the key lending rate at 0.1 percent and refrained from expanding credit measures at an Aug. 9-10 meeting. The yen reached 83.60 per dollar on Aug. 24, the strongest since June 1995. BOJ Governor Shirakawa said at his press conference that the central bank must consider the negative effects of cutting its benchmark interest rate of 0.1 percent. Japanese Stock Market The Nikkei 225 Stock Average fell 5.9 percent since the BOJ’s last meeting through last week amid signs that global growth is faltering and on concern the yen’s advance may damp a Japanese economy that expanded at its slowest pace this year last quarter. The Nikkei 225 trimmed its gain to 1.8 percent after rising as much as 3.2 percent, the most since June 3. Australia’s dollar declined to 76.29 yen from 76.62 yen in New York last week, after earlier rising as high as 77.52, the strongest since Aug. 18. The currency was at 89.79 U.S. cents from 89.89 cents. New Zealand’s dollar bought 60.38 yen from 60.56 yen, and traded at 71.07 cents from 71.09 cents. The yen tends to gain in times of economic or financial turmoil as Japan’s current-account surplus means it doesn’t need foreign capital. A stronger domestic currency hurts the overseas competitiveness of Japanese exporters and reduces the value of earnings from other countries. Won Climbs The won rose to the strongest in almost a week after the government said in an e-mailed statement yesterday that banks will be allowed to ease restrictions on mortgage loans for first-home buyers and owners of one residence until the end of March. The waiver for taxes on home sales will be extended by two years until the end of 2012, the government said. Bank of Korea Governor Kim Choong Soo said over the weekend that the won is more “volatile” than the currencies of the U.K. and Japan. His comments highlight “the nature of the won, which could actually add to the won’s strength,” said Frances Cheung, a senior strategist at Credit Agricole. “There’s better risk appetite,” said Hong Kong-based Cheung. “No one really thinks Kim can really come up with an effective tool to cut down on volatility.” Federal Reserve Chairman Ben Bernanke said last week the U.S. central bank “will do all that it can” to ensure a continuation of the economic recovery, and outlined steps it might take if growth slows. The won appreciated 0.4 percent to 1,192.13 per dollar, after touching 1,186.55, the highest level since Aug. 24. To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net

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