The yen also traded close to a three-week high against the dollar after the Observer newspaper reported HSBC Holdings Plc will today announce provisions of $4.6 billion on U.S. loans including mortgages and credit card debt. The yen gained the most against the New Zealand and Australian dollars, favorites of so-called carry trades.
The yen advanced to 158.97 per euro as of 9:23 a.m. in Tokyo compared with 159.21 in late New York on May 9. It reached 158.65, near the lowest since April 14. Japan's currency advanced to 102.74 yen from 102.87 last week. It reached 102.57, the highest since April 18.
The yen advanced to 96.69 yen per Australian dollar from 97.10 in New York on May 9. It also gained to 78.78 yen per New Zealand dollar from 79.18, as the Nikkei 225 Stock Average dropped 0.5 percent.
The yen has gained 16 percent versus the dollar since the beginning of 2007 as the world's biggest banks and securities firms have reported asset writedowns and credit losses of more than $323 billion linked to the collapse of the U.S. subprime mortgage market.
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 two. The risk is that currency- market moves erase those profits.
Japan's target lending rate of 0.5 percent is the lowest among major economies and compares with 8.25 percent in New Zealand and 7.25 percent in Australia.