BLBG: Yen Falls as Stock Gains Boost Demand for High-Yielding Assets
The yen fell against the euro, heading for its biggest quarterly loss since June, on speculation a rebound in Asian stocks will encourage investors to buy more higher-yielding assets.
The euro gained the most in almost a month versus the yen on optimism a European Central Bank policy maker speaking today will signal the bank will refrain from cutting interest rates further after lowering them this week. The yen also weakened against the dollar, adding to its worst quarter since 2001, on concern the Bank of Japan’s Tankan survey tomorrow will show business sentiment dropped to a 30-year low, damping demand for the currency.
“Shares have turned positive, implying some easing in risk aversion,” said Masashi Kurabe, head of currency sales and trading in Hong Kong at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s biggest publicly traded bank by assets. “This is causing selling of the yen.”
The yen dropped to 130.29 per euro as of 1:01 p.m. in Tokyo from 128.36 in New York yesterday, when it touched 126.42, the strongest level since March 16. Japan’s currency fell to 98.28 per dollar from 97.26. The dollar traded at $1.3268 per euro from $1.3199.
Japan’s currency’s has tumbled 7.8 percent against the greenback this quarter, the worst performance since the three months through December 2001, and has fallen 2.9 percent against the euro. It may fall to 130.55 versus euro today, Kurabe said.
The Nikkei 225 Stock Average rose 1.5 percent after earlier declining as much as 0.4 percent, and the MSCI Asia Pacific index of shares outside Japan advanced 1.6 percent. Futures on the Standard & Poor’s 500 index gained 0.9 percent.
Stimulus Package
Demand for higher-yielding assets rose after Japan’s Chief Cabinet Secretary Takeo Kawamura said Prime Minister Taro Aso will today announce details of a third economic-stimulus package.
The yen fell the most against Australian and New Zealand dollars among the 16 major currencies on speculation investors sought higher returns in those countries. Japan’s currency weakened 2.1 percent against the Australian dollar to 67.68 and declined 1.9 percent versus New Zealand’s dollar to 55.85.
Japan’s benchmark interest rate is 0.1 percent, compared with 3.25 percent in Australia, 3 percent in New Zealand and 1.5 percent in Europe.
The yen snapped a two-day gain versus the greenback before the Tankan survey tomorrow that may show sentiment among Japan’s large manufacturers fell to the lowest level since 1975.
‘Very Yen Negative’
“If the Tankan is worse than expected, then it’ll be very yen negative as market participants won’t regard the yen as a safe haven any more,” said Toru Umemoto, chief currency strategist in Tokyo at Barclays Capital, a unit of the U.K.’s third-biggest bank.
Confidence among Japan’s large manufacturers slid to minus 55 this quarter from minus 24 in December, according to a Bloomberg News survey of economists. The nation’s jobless rate climbed to a three-year high of 4.4 percent in February, from 4.1 percent in January, a statistics bureau report showed today.
The euro rose for the first time in three days against the yen on speculation assets denominated in Europe’s currency will maintain their advantage over those in Japan even if the ECB cuts rates at this week’s meeting.
ECB President Jean-Claude Trichet and his colleagues will lower borrowing costs to 1 percent from 1.5 percent on April 2, according to a Bloomberg survey. ECB council member Axel Weber this month said the central bank shouldn’t cut borrowing costs below one percent. Governing Council member Miguel Angel Fernandez Ordonez speaks at 10 a.m. today in Madrid.
“The ECB will continue to be reluctant to cut rates or to move to quantitative easing in the near future,” said Satoru Ogasawara, a foreign-exchange analyst and economist in Tokyo at Credit Suisse Group AG, the second-largest Swiss bank. “The monetary-policy differentials make the euro more supported.”
