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Yen Gains on Speculation Obama to Call for New Financial Reform

Japanese 10000 yen notes
Japanese 10000 yen notes are arranged for a photograph in Tokyo, on Jan. 8, 2009. Photographer: Tomohiro Ohsumi/Bloomberg

The yen advanced against the dollar on speculation U.S. President Barack Obama will call for new financial regulations, boosting demand for Japan’s currency as a refuge from global banking-sector turmoil.

The Japanese currency rose against 11 of its 16 major counterparts before Obama speaks today at New York’s Cooper Union where he will take aim at “risky decisions” made on Wall Street, according to his spokesman. The pound strengthened for a third day against the euro before a central bank report economists say will show the country’s lenders increased loans to buy homes last month.

“The markets are wary over what Obama may say about new financial-industry regulations,” said Yuji Saito, director of the foreign-exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “The mood is leaning toward risk aversion. The bias is for the yen to be bought.”

The yen strengthened to 93.03 per dollar as of 8:36 a.m. in London, from 93.19 in New York yesterday. It was little changed at 124.75 per euro. The single currency climbed to $1.3410 from $1.3390 yesterday, when it fell to $1.3359, the lowest level since April 9.

The pound gained to $1.5450 from $1.5411 and strengthened to 86.79 pence per euro from 86.89 pence. The MSCI Asia Pacific Index of shares slipped 0.6 percent while the Stoxx Europe 600 Index rose 0.1 percent.

“Financial reform is something that is born out of an economic collapse that started on Wall Street and spread to Main Street America,” White House press secretary Robert Gibbs said previewing the president’s address.

Obama’s Speech

Obama is giving the address as he and Democratic leaders push to get legislation on financial markets through Congress by next month. The Senate Agriculture Committee yesterday approved derivatives legislation requiring U.S. lenders such as JPMorgan Chase & Co. and Bank of America Corp. to spin off their swaps trading desks.

The Securities and Exchange Commission last week filed a lawsuit against Goldman Sachs Group Inc. for fraud linked to its derivatives trading.

“The Goldman issue will take time to be solved, keeping stocks in a downtrend,” said Minoru Shioiri, chief manager of foreign-exchange trading in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan’s largest publicly traded bank by market value. “There’s a downside risk for cross currencies against the yen.”

G-7 Meeting

Group of Seven finance ministers are meeting today in Washington where they will discuss currencies, financial markets and the timing of removing fiscal stimulus, a U.S. Treasury Department official said on April 20.

The yen tends to strengthen during economic and financial turmoil because Japan’s trade surplus makes it less reliant on foreign capital.

Sterling climbed to its strongest level in almost a week against the dollar. The Bank of England will probably say commercial lenders granted 50,000 loans for mortgages in March, from 48,000 in February, according to a Bloomberg survey. A government report will probably show retail sales rose for a second month in March, according to a separate Bloomberg survey of economists.

“We have long held the view that U.K. growth is better than some of the official data portrays and that more and earlier policy tightening will be needed than priced by rates markets,” analysts including Fiona Lake and Thomas Stolper at New York-based Goldman Sachs Group Inc. wrote in a research note. “With a possible shift in BOE stance, sterling could rally further, in particular against the euro.”

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