Yen, Dollar Gain as Goldman Sachs, Greece Spur Refuge Demand

By Ben Levisohn and Paul Dobson

April 19 (Bloomberg) -- The yen and dollar rose against most of their major counterparts as concern an investigation of Goldman Sachs Group Inc. will widen and Greece’s aid package may falter boosted demand for Japan’s currency as a refuge.

The pound fell the most this month against the dollar on deepened concern that next month’s U.K. election will produce no clear winner. The yen advanced to a three-week high against the euro as Britain’s Prime Minister Gordon Brown called yesterday for an investigation of the New York-based bank after the U.S. Securities and Exchange Commission alleged fraud.

“Risk aversion is back in play, sparked by the case against Goldman Sachs and renewed sovereign credit concerns regarding Greece,” said Omer Esiner, a senior foreign-exchange analyst in Washington at Travelex Global Business Payments, a currency- exchange network. “There’s a flight back into safe-haven currencies like the yen.”

The yen appreciated 0.3 percent to 124.12 per euro at 10:10 a.m. in New York, from 124.44 on April 16, after reaching 123.16, the strongest level since March 26. The yen traded at 92.24 per dollar, compared with 92.17. The euro fell 0.3 percent to $1.3457, from $1.3503, after reaching $1.3416, the lowest level since April 9.

South Africa’s rand fell 0.9 percent 12.36 yen and Norway’s krone declined 0.4 percent to 5.923 per dollar on speculation investors will reduce carry trades, in which they buy higher- yielding assets with amounts borrowed in nations with low interest rates. Japan’s target lending rate of 0.1 percent and the U.S. benchmark of zero to 0.25 percent have made the yen and dollar popular for funding such transactions.

‘Moral Bankruptcy’

Brown said he was “shocked” at the “moral bankruptcy” indicated in the suit. The German government “will ask the SEC for information,” said Ulrich Wilhelm, a spokesman for Chancellor Angela Merkel. “Then we will look at the records and consider possible legal steps.”

Goldman Sachs has said the claims are “completely unfounded,” while Paulson wasn’t accused of wrongdoing.

Talks on Greece involving the European Commission, the IMF and the European Central Bank were delayed until April 21 from today because of a volcanic ash cloud disrupting air travel. Initial discussions will be held by phone today, a commission spokesman said.

The extra yield offered by Greek 10-year bonds over similar-maturity German bunds, Europe’s benchmark debt securities, widened 0.32 percentage point to 4.62 percentage points, the most since October 1998. Greece needs to raise 11.6 billion euros ($15.6 billion) by the end of May. A wider gap between yields indicates perceptions of higher risk for Greece.

‘Level of Concern’

“The spread is as good as any indicator of the level of concern,” said Simon Derrick, chief currency strategist at Bank of New York Mellon Corp. in London. “We are moving slowly toward the point where the button is hit to call in the aid. All those things continue to weigh on the euro.”

The euro slid 5.7 percent against the dollar in the first quarter on concern Greece’s debt crisis may threaten the economic recovery across the region.

The pound slid versus the dollar today after a survey showed an increase in support for the Liberal Democrats, boosting concern the U.K. will elect a government too weak to tackle the country’s record budget deficit. The Liberal Democrats overtook the ruling Labour Party and Conservatives, according to a YouGov poll for today’s Sun newspaper.

The chance of the May 6 vote producing a so-called hung parliament is 78.9 percent, according to Royal Bank of Scotland Group Plc estimates based on opinion polls data.

Weaker Pound

The pound lost as much as 1.1 percent to $1.5192 in the biggest intraday decrease since March 24. Sterling depreciated 0.2 percent to 88.04 pence per euro.

The Australian dollar’s push to parity with the U.S. dollar is in jeopardy as central bankers signal they may slow the pace of interest-rate increases and China moves closer to revaluing the yuan.

After rallying 28 percent the past 12 months, more than any other currency tracked by Bloomberg, Morgan Stanley predicts the Aussie may tumble 16 percent by year-end because higher borrowing costs will curb growth.

Australia’s dollar decreased 0.4 percent to 92.07 U.S. cents and slipped 0.3 percent to 84.93 yen.

To contact the reporters on this story: Ben Levisohn in New York at blevisohn@bloomberg.net; Paul Dobson in London at pdobson2@bloomberg.net

Last Updated: April 19, 2010 10:17 EDT