Yen Gains

The yen rose as investors cut holdings of higher-yielding assets financed with borrowings in Japan ahead of U.S. reports today that economists say will show a recession is deepening in the world’s largest economy.

The currency advanced the most against the Australian dollar, popular in so-called carry trades. It snapped two days of losses against the dollar and the euro on speculation a bailout of Citigroup Inc. and U.S. President-elect Barack Obama’s stimulus plans won’t prevent a protracted slump. The U.S. economy shrank more than estimated in the third quarter, a government report may show today.

The yen advanced to 96.15 per dollar as of 7:32 a.m. in New York from 97.34 yesterday, when it fell 1.4 percent. The yen may strengthen to 90 against the dollar by March, Frank said. The currency rose to 123.51 per euro from 126.08, after dropping 4.3 percent yesterday. The euro fell to $1.2847 from $1.2953.

The yen strengthened 3.3 percent to 61.59 versus the Australian dollar from late in New York yesterday, and advanced 2.8 percent to 52 against New Zealand’s dollar. It gained 2.9 percent versus Norway’s krone to 13.6675 yen.

The Japanese currency is popular in carry trades, where purchases of higher-yielding assets are funded in nations with low borrowing costs. Japan’s benchmark interest rate of 0.3 percent compares with 5.25 percent in Australia, 6.5 percent in New Zealand and 4.75 percent in Norway.,
11/25/2008 5:21:13 AM