Yen Falls as Stock Gains Spur Buying of Higher-Yielding Assets
By Stanley White
Dec. 10 (Bloomberg) — The yen fell against the euro after Asian stocks rose, encouraging investors to increase holdings of higher-yielding assets funded with Japan’s currency.
The yen also declined for the first day in three against the dollar after Senate Banking Committee Chairman Christopher Dodd said U.S. lawmakers and the White House are “very, very close” to agreeing on a $15 billion bailout for General Motors Corp. and Chrysler LLC.
“The yen’s bias is to weaken,” said Tetsu Aikawa, deputy general manager of the capital markets division at Shinsei Bank Ltd. in Tokyo. “Stock markets are showing signs of stability, and that will encourage investors to take on risk. Negotiations on bridge financing for U.S. car manufacturers seems to be heading in the right direction.”
The yen fell to 119.75 per euro as of 11:15 a.m. in Tokyo from 119.07 late yesterday in New York. Against the dollar, it declined to 92.55 from 92.13 yesterday. It rose to 91.60 on Dec. 5, the highest since Oct. 24. The euro was little changed at $1.2947. Japan’s currency may decline to 93 per dollar and 120.50 against the euro today, Aikawa said.
Against the British pound, the yen fell to 136.42 from 135.87. It also declined to 9.0653 per South African rand from 9.0401. In carry trades investors get funds in a country with low borrowing costs and buy assets where returns are higher. Japan’s 0.3 percent target rate is the lowest among developed nations and compares with 1 percent in the U.S., 2.5 percent in Europe, 2 percent in the U.K. and 12 percent in South Africa.
Stocks Rise
The MSCI Asia-Pacific index of regional shares rose 0.6 percent for the fourth day of gains. South Korea’s Hynix Semiconductor Inc., the world’s second-largest computer memory chipmaker, won financial support from creditors.
U.S. lawmakers and President George W. Bush’s administration may agree to an auto bill late on Dec. 9, Dodd said in a television interview on PBS. Negotiators are down to “one or two issues” before a deal was reached, he said.
The yen has gained this year against all 178 currencies tracked by Bloomberg News on speculation the global economic slump and interest-rate cuts would prompt investors to unwind carry trades.
Annual Gain
Japan’s currency appreciated 21 percent versus the dollar, 36 percent against the euro and 70 percent versus New Zealand’s dollar this year. It’s headed for its first annual gain versus Brazil’s real, the euro and the New Zealand dollar in at least six years.
“Deleveraging is not fully done in the financial industry yet,” said Benedikt Germanier, a currency strategist in Stamford, Connecticut, at UBS AG, who predicted the yen may appreciate to 90 per dollar in a month. “The yen still has buying potential.”
The stronger yen has eroded Japanese exporters’ revenue. Sony Corp, the world’s second-biggest consumer-electronics maker, said yesterday it plans to eliminate 16,000 jobs. It said on Oct. 23 that net income will probably drop 59 percent in the year ending March 31.
The dollar has gained 35 percent versus the pound this year and 13 percent against the euro as the credit-market seizure and $980 billion of losses on mortgage-related securities worldwide led investors to repatriate overseas investment to the U.S. and seek shelter in Treasuries.
Demand for U.S. government debt pushed the yield on the 10- year note to 2.65 percent yesterday. It reached 2.505 percent on Dec. 5, the lowest level since at least 1962, when the Federal Reserve’s daily records began.
The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, was little changed at 85.869 today. It touched 88.463 on Nov. 21, the highest since April 2006.
To contact the reporter on this story: Stanley White in Tokyo atswhite28@bloomberg.net
Last Updated: December 9, 2008 21:17 EST