Yen Rises as China Pledges to Curb ‘Hot Money’; Euro Weakens

The yen rose against all of the most- traded currencies after China said it will curb capital flows into its economy and concern that European countries will struggle with budget deficits fueled demand for safety.

Japan’s currency rose for a third day versus the euro. The extra yield, or spread, investors demand to hold Portuguese and Irish 10-year bonds instead of similar German notes climbed to records. The 16-nation euro slumped to its weakest level in almost three weeks against the Swiss franc. The yuan reached a two-week high as some investors speculated China may also raise interest rates before a Group of 20 leaders’ meeting this week.

“There is some risk aversion” supporting the yen, said Roberto Mialich, senior currency strategist at UniCredit SpA in Milan. “Also there are rumors China might hike rates again. The market has shifted its attention to the tensions in the euro area.”

The yen advanced to 112.61 per euro at 7:45 a.m. in New York, from 113.01 yesterday. The Japanese currency gained 0.7 percent to 80.63 per dollar. The euro strengthened 0.3 percent to $1.3966, after sliding to $1.3824, the weakest since Oct. 29.

China’s State Administration of Foreign Exchange said today it would crack down on speculative “hot money” flowing into the country, according to a statement on the regulator’s website. The agency will “strictly” punish banks that violate its currency rules, the statement said.

To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net

To contact the editor responsible for this story: Daniel Tilles at dtilles@bloomberg.net

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