The currency rose the most versus Australia's dollar, a favorite of so-called carry trades, after Yomiuri newspaper reported Mizuho Financial Group Inc.'s losses linked to subprime debt may swell to 250 billion yen ($2.3 billion) in the year ended March 31. The dollar fell on speculation the Federal Reserve will cut interest rates today by a half-percentage point.
The yen climbed to 106.86 against the dollar at 10:10 a.m. in Tokyo from 107.11 late in New York yesterday. It also advanced to 157.77 per euro from 158.27. Japan's currency may rise to 157.50 against the euro and 106.70 versus the dollar today, Ishikawa forecast.
In a carry trade, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread between the borrowing and lending rate. The risk is that currency market moves erase those profits.