Yen, Dollar Decline as Stocks Rise, Driving Higher-Yield Demand

By Bo Nielsen

Nov. 4 (Bloomberg) -- The yen and the dollar declined as improved bank earnings drove gains in stocks, fanning demand for higher-yielding currencies such as the South African rand and the Norwegian krone.

The yen fell against all 16 most-traded currencies tracked by Bloomberg as the MSCI World Index advanced after Societe Generale SA posted third-quarter profit that beat analysts’ estimates. The Dollar Index slid for the second time in three days on speculation the Federal Reserve will today repeat its pledge to keep interest rates at a record low for an “extended period,” diminishing the appeal of U.S. assets.

“Risk appetite improved markedly,” Gareth Berry, a currency strategist at UBS AG in Singapore, wrote in a note today. It’s “largely due to the fact that stocks have made positive returns.”

The yen dropped 0.5 percent to 133.60 per euro as of 7:31 a.m. in London, and declined 0.3 percent to 90.57 per dollar. The Japanese currency slid 1.1 percent to 11.6598 against the rand. The dollar weakened to $1.4747 per euro, from $1.4724, and depreciated to 7.7668 against the rand, from 7.8377. The U.S. currency traded at 5.7520 versus the krone, from 5.7768.

The MSCI World Index climbed 0.2 percent and Standard & Poor’s 500 Index futures advanced 0.3 percent.

To contact the reporter on this story: Bo Nielsen in Copenhagen at bnielsen4@bloomberg.net

Last Updated: November 4, 2009 02:47 EST