Yen Rises as Stock Futures Fall


The yen rose against the dollar and the euro as U.S. stock futures fell and investors increased bets the Federal Reserve and European Central Bank will cut interest rates to limit the severity of the global economic slump.

Japan's currency also gained against the Australian dollar after the Reserve Bank of Australia said it saw a ``strong economic case'' for its Oct. 7 interest-rate reduction, fueling expectations for another cut. The U.S. dollar rose to a year- and-a-half high against the euro after Fed Chairman Ben S. Bernanke called yesterday for government-stimulus measures to avert a prolonged recession.

The yen rose 1.9 percent to 133.32 per euro at 7:34 a.m. in New York, from 135.92 yesterday, in its third day of gains. The dollar climbed 1 percent to $1.3216 from $1.3344 after reaching $1.3208 per euro, the strongest level since March 2007. The yen advanced 1 percent to 100.89 per dollar from 101.86.

Futures on the Standard & Poor's 500 Index expiring in December fell 1.3 percent, encouraging investors to reverse carry trades in which investors get funds in a country with low borrowing costs and buy assets where returns are higher. Japan's 0.5 percent target lending rate compares with 6 percent in Australia and 7.5 percent in New Zealand.

Against the Australian dollar, the yen rose to 69.48 from 71.76 late yesterday in New York. It also advanced to 61.85 per New Zealand dollar from 63.48.

The euro dropped against the yen as investors bet the ECB will lower borrowing costs further after cutting the main refinancing rate by a half-percentage point to 3.75 percent on Oct. 8 as part of coordinated reductions by major central banks.

The dollar has gained 18 percent since touching a record low of $1.6038 per euro on July 15 on speculation the greenback will benefit as the European economy slows.


TradingEconomics.com, Bloomberg.com
10/21/2008 5:30:40 AM