Sept. 20 (Bloomberg) -- Yen buying by Japanese individual investors reached a three-month high of $1.57 billion yesterday, figures from the Tokyo Financial Exchange indicate.

Pensioners, businessmen and housewives, so-called mom and pop traders, accelerated purchases of Japan's currency a day after the Federal Reserve cut interest rates, eroding the yield advantage on dollar investments. The popularity of currency margin trading has added to declines in the yen, which has dropped 9 percent against New Zealand's dollar and 11 percent versus Australia's in the past year.

``Expectations of a narrowing gap in interest rates between the U.S. and Japan are prompting Japanese retail investors to buy the yen when it weakens,'' said Koji Fukaya, senior currency strategist in Tokyo at Deutsche Securities. ``They are increasingly having strong anxiety about the dollar's fate.''

Long positions held by individual investors on the yen against the dollar, wagers Japan's currency will rise, reached $91 million yesterday, the highest since June 27, the data shows from the Tokyo Financial Exchange, Japan's largest financial futures market.

The Bank of Japan estimated in December 2006 that the exchange's total share of the nation's margin trading was 5.8 percent. The $1.57 billion compared with $1.03 billion a week ago.

Mrs. Watanabe

The yen traded at 115.43 against the dollar at 8:48 a.m. in London from 116.10 late yesterday in New York. It fell to a two- week low of 116.38 on Sept. 18, when Fed policy makers reduced the target rate for overnight loans between banks by a more-than- expected 50 basis points to 4.75 percent, the first decrease since June 2003. Japan's key rate is 0.5 percent.

The yen has rebounded from a 4 1/2-year low to become the second-best performer, following the Norwegian krone, among the 16 most-active currencies in the past three months.

The yield spread between two-year U.S. and Japanese bonds narrowed to 3.20 percentage points today, from 3.27 percentage points on Sept. 17.

``Mrs. Watanabe got wise,'' said Toru Umemoto, chief currency strategist at Barclays Capital in Tokyo, referring to the metaphorical name for the Japanese housewife. ``They are more and more becoming like professional traders.''

To contact the reporter on this story: Kosuke Goto in Tokyo at kgoto2@bloomberg.net.

Last Updated: September 20, 2007 04:00 EDT