Dollar Advances Against Yen

The dollar rose against the yen and snapped two days of declines versus the euro as oil fell for a fourth day and rising stocks encouraged investors to buy higher- yielding assets financed in Japan.

The U.S. currency also declined versus the euro after European Central Bank council member Yves Mersch said the bank hasn't signaled it's about the embark on a series of interest- rate increases. The U.K. pound stayed lower against the dollar and euro after minutes from the Bank of England's June meeting showed policy makers voted 8-1 to keep interest rates unchanged.

The U.S. currency climbed to 108.31 yen as of 6:45 a.m. in New York, from 107.93 late yesterday. It also strengthened to $1.5481 per euro, from $1.5511, after falling as low as $1.5537 earlier. The yen dropped to an 11-month low against the euro of 167.66, and traded at 167.74.

Crude oil for July delivery traded at $133.89 a barrel, down a fourth day and $6 below a record high of $139.89 reached on June 16. The correlation of the dollar against the euro and oil prices is minus 0.93 for the past year, according to Bloomberg calculations based on value changes, indicating they have moved in the opposite direction 93 percent of the time.

Asian stocks rose a fourth day, supporting so-called carry trades, where investors borrow in an economy with relatively low interest rates to buy higher-yielding assets elsewhere. They profit by earning the spread, or difference, between borrowing and lending costs. Japan's benchmark rate is 0.5 percent, the lowest among industrialized countries.

The dollar has lost 10 percent against the euro since the Fed started to lower rates from 5.25 percent in mid-September. The weaker dollar has helped push commodities, such as oil and corn, to record highs, stoking inflation. Prices paid to U.S. producers rose 1.4 percent in May, the biggest gain since November, the Labor Department said yesterday.

Dollar Advances Against Yen, Bloomberg
6/18/2008 6:39:21 AM