Yen Gains

The yen rose against the euro and the dollar for the first time in three days on bets a deepening global recession will prompt investors to sell higher-yielding assets funded by low-cost loans in Japan’s currency.

The dollar pared its drop against the euro as U.S. stocks erased gains that came after the Federal Reserve committed up to $800 billion to thaw the flow of credit. The yen also advanced versus the Australian dollar and New Zealand’s currency on speculation carry trades will unwind.

The yen gained 2 percent to 95.43 per dollar at 2:45 p.m. in New York, from 97.34 yesterday. Japan’s currency increased 1.6 percent to 124.10 per euro, from 126.08. The dollar fell 0.4 percent to $1.3002 versus the euro, from $1.2953 yesterday, weakening beyond $1.30 for the first time since Nov. 5.

Japan’s currency rose 3.9 percent to 61.29 per Australian dollar and 3.5 percent to 51.65 versus New Zealand’s currency on speculation investors will unwind trades in which they get funds in a country with low borrowing costs and buy asset where returns are higher. Japan’s 0.3 percent target lending rate, the lowest among developed nations, compares with 5.25 percent in Australia and 6.5 percent in New Zealand.

The U.S. currency has gained 20 percent versus the euro, 48 percent to 2.3317 Brazilian reais and 47 percent to 64.31 U.S. cents against the Aussie since the end of July as investors sought refuge from deepening credit market losses.

The ICE’s Dollar Index, which tracks the greenback against the euro, the yen, the pound, the Canadian dollar, the Swiss franc and Sweden’s krona, fell 1.1 percent to 85.14 today, following a 2.4 percent drop yesterday. The index rose to 88.463 on Nov. 21, the highest since April 2006.,
11/25/2008 11:55:58 AM