Yen May Extend Slide Versus Dollar, Euro


The yen may fall against the dollar and the euro after stocks in the U.S., Germany and Switzerland rose, easing concern that investors will sell higher-yielding assets to repay low-cost loans in Japan's currency.

The Norwegian krone and the Australian and Canadian dollars were among the biggest gainers yesterday as crude oil futures rose the most in almost two weeks. The U.S. dollar index, which measures the greenback against the currencies of major trading partners including Canada, the euro-member nations and Switzerland, fell for the first time in six days.

The yen fell 2.7 percent to 97.68 per U.S. dollar at 5 p.m. in New York from 95.01 on Nov. 12, the most since Nikkei reported on Oct. 28 that the Bank of Japan was preparing to cut interest rates. Against the euro, the yen fell 5.1 percent, also the most since Oct. 28, to 124.78 from 118.77.

The dollar index has moved in the opposite direction from the stock market 88 percent of the time since the start of September, according to Bloomberg data. The Standard & Poor's 500 Index added 6.9 percent, erasing a slide of 3.9 percent.

The yen initially fell yesterday after the Reserve Bank of Australia intervened to support its currency, fueling speculation other central banks may follow suit. Japan's Finance Minister Shoichi Nakagawa told lawmakers in Tokyo yesterday that abrupt currency moves are ``undesirable'' and a stronger yen hurts domestic stock investors. He said last month Japan may intervene for the first time in four years.

The euro strengthened 2 percent to $1.2769 from $1.2505 the prior day after earlier falling to a two-week low against the dollar following a government report showing the German economy entered its worst recession in at least 12 years.

The pound fell to $1.4773, the lowest since June 2002, following comments yesterday by Bank of England Governor Mervyn King that policy makers ``are prepared to cut the bank rate to whatever level is necessary'' to make sure inflation hits the central bank's target.

The yen reached a two-week high against the euro on Nov. 12, after U.S. Treasury Secretary Henry Paulson's plan to divert bailout money from banks sparked cuts in purchases of higher- yielding assets. Paulson said Nov. 12 he plans to use the second half of the $700 billion Troubled Asset Relief Program, known as TARP, to help relieve pressure on consumer credit, scrapping a proposal to buy devalued mortgage assets from banks.


TradingEconomics.com, Bloomberg.com
11/13/2008 3:17:05 PM