Yen Falls as Economic Recovery Signs, Asian Stock Gains Damp Safety Demand

The yen fell against higher- yielding currencies as signs the global economic recovery is gaining momentum boosted demand for riskier assets.

Japan’s currency weakened against all 16 of its most-traded peers as stocks rose and a U.K. report showed house prices climbed for a ninth month. U.S. data this week may show the housing market is stabilizing. South Korea’s won advanced to a 19-month high versus the dollar as overseas investors pumped more money into the nation’s shares to profit from accelerating economic growth.

“Data across the globe underscore the economy is recovering, which then boosts risk sentiment,” said Koichi Kurose, chief strategist in Tokyo at Resona Bank Ltd., a unit of Japan’s fourth-largest banking group. “Buoyant risk sentiment will encourage investors to sell the yen and re-invest in higher-yielding assets.”

The yen weakened to 125.94 per euro as of 8:24 a.m. in London, from 125.73 in New York last week. The currency depreciated to 94.12 per dollar, from 93.97, and declined to 87.42 per Australian dollar, from 87.19. It earlier slid to 87.61, the weakest since September 2008. The euro traded at $1.3382, from $1.3384.

The won rose 0.5 percent to 1,103.80 per dollar, after advancing to 1,102.85, the strongest since September 2008. The MSCI World Index of shares advanced 0.7 percent.

Photographer: Tomohiro Ohsumi/Bloomberg

Japanese 10000 yen and 1000 yen notes are arranged for a photograph in Tokyo, on May 26, 2009. Close

Japanese 10000 yen and 1000 yen notes are arranged for a photograph in Tokyo, on May 26, 2009.

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Photographer: Tomohiro Ohsumi/Bloomberg

Japanese 10000 yen and 1000 yen notes are arranged for a photograph in Tokyo, on May 26, 2009.

Pound Gains

The pound gained versus the dollar, the euro and the yen after London-based Hometrack Ltd. said the average cost of a home in England and Wales increased 0.2 percent from March. The S&P/Case-Shiller home-price index in the U.S. climbed 1.3 percent, the first increase since December 2006, according to a Bloomberg News survey of economists before tomorrow’s report.

“The recovery of economies around the world, including the U.K., appears to be firm,” said Yuji Saito, director of the foreign-exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “The pound may be bought.”

The U.K. currency advanced 0.7 percent to $1.5489 and appreciated 0.7 percent to 86.42 pence per euro. Sterling rose 0.8 percent to 145.68 yen.

The won gained for the first time in three days versus the dollar before reports this week that economists said will show gross domestic product rose at a faster pace and exports climbed for a sixth month. The Kospi index gained 0.9 percent as overseas funds bought more Korean shares than they sold for a fourth day.

Korean Growth

“Data this week is expected to be very strong,” said Peter Redward, head of rates research at Barclays Plc. in Singapore. “Combine that with strong risk appetite and very good demand for Korean assets, which is reinforcing the won.”

A Bank of Korea report tomorrow will show the economy expanded 7.5 percent from a year earlier in the first quarter, the most since 2002, according to a Bloomberg survey. Exports increased 32 percent in April, a separate survey showed before the May 1 report.

The dollar advanced to its strongest in almost three weeks versus the yen on speculation the Federal Reserve is moving closer to withdrawing stimulus measures amid signs the U.S. economic recovery is intact.

Fed policy makers meeting April 27 and April 28 will try to decide how and when to sell mortgage-backed securities and reduce its balance sheet, the Wall Street Journal said April 23, without saying where it got the information.

“Our economists note there is some potential for a very modest reworking of the key policy guidance language,” Gareth Berry, a currency strategist in Singapore at UBS AG, wrote in a research note today. “We continue to look for further dollar strength as the Fed shows every intention of gradually continuing down the path to policy normalization.”

Futures on the Chicago Board of Trade show a 72 percent chance the Fed will raise its benchmark rate at least a quarter- percentage point by its December meeting.

To contact the reporter on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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