Yen Weakens Versus Higher-Yielding Currencies as Stocks Advance

By Ron Harui

May 19 (Bloomberg) -- The yen weakened against higher- yielding currencies as an advance in Asian stocks and optimism the global recession is easing damped demand for safer assets.

Japan’s currency fell against the New Zealand dollar and South Korean won before a U.S. government report that may show housing starts climbed, boosting the appetite for riskier assets. India’s rupee climbed for a third day versus the dollar as Prime Minister Manmohan Singh’s electoral victory spurred gains in the nation’s stocks. The euro rose on speculation a German report today will show investor confidence jumped to a two-year high. 

“Equities are rising and the worldwide recession may have bottomed out,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. “This augurs well for risk-taking appetite and is negative for the yen and the dollar.” 

The yen fell to 57.63 per New Zealand dollar as of 1:29 p.m. in Tokyo from 57.28 in New York yesterday. It weakened to 12.8970 Korean won from 13.0768. Against the U.S. dollar, the British pound reached $1.5354, the highest since Jan. 8, on prospects that demand for the safety of the greenback eased.
Japan’s currency fell to 130.96 per euro from 130.61 yesterday. It bought 96.50 per dollar from 96.30 yesterday when it touched 94.55, the strongest since March 20. The euro was at $1.3572 from $1.3562. India’s rupee climbed to 47.30 per dollar from 47.92 yesterday, when it surged 3.1 percent.

Asian Currencies 

Asian currencies advanced against the yen and the dollar as optimism the worst of the global recession is over encouraged investors to buy securities in the region. The MSCI Asia-Pacific Index of regional shares climbed 2.5 percent after the Standard & Poor’s 500 Index rose 3 percent yesterday.

The won extended gains in the past month to 7.1 percent against the dollar, the best performance among Asia’s 10 most- traded currencies, as overseas investors bought more local shares than they sold for a third day. The won rose 1.3 percent to 1,243.40, according to data compiled by Bloomberg.

“The won is getting an early boost from an overnight rally in U.S. shares and as foreign investors continue buying local stocks,” said Jo Hyun Suk, a currency dealer at Korea Exchange Bank in Seoul.
The Taiwan dollar advanced to NT$32.89 per dollar from NT$32.994 yesterday, and Thailand’s baht strengthened to 34.43 from 34.56.

‘Good Position’ 

The Australian dollar approached a one-week high against the greenback after the nation’s central bank Governor Glenn Stevens said the economy is in good shape to benefit from a global recovery later this year as interest-rate cuts drive domestic demand and a pickup in China stokes exports.
Australia “should be in a relatively good position and well placed to take part in a renewed international expansion,” Stevens said in Sydney.

The Australian dollar bought 76.84 U.S. cents from 76.58 yesterday when it reached 76.68 cents, the most since May 13.

U.S. housing starts increased in April to an annual rate of 520,000 from 510,000 the previous month, according to the median forecast of economists surveyed by Bloomberg. The Commerce Department will release the report at 8:30 a.m. in Washington.

Demand for the euro was bolstered on speculation a German report today will show investor confidence increased.

The ZEW Center for European Economic Research will say its index of investor and analyst expectations rose to 20 from 13 in April, according to the median forecast in a separate Bloomberg survey. ZEW releases the report, which aims to predict economic developments six months ahead, at 11 a.m. in Mannheim.

“There’s a possibility that Germany’s ZEW survey may surprise on the upside,” said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Group Plc in Tokyo and a former Bank of Japan currency trader. “This may lead to buying of the euro against the yen amid renewed risk sentiment.”

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net.
Last Updated: May 19, 2009 00:30 EDT