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Japanese Yen Gains as Stock Losses, Economy Boost Safety Demand

The yen advanced against higher-yielding peers as a decline in stocks and concern the global economic recovery is losing steam boosted demand for the currency as a haven.

Japan’s currency rose against the dollar amid speculation the U.S. economy may be slowing enough for the Federal Reserve to increase bond purchases. The U.K. pound rebounded from a three-week low against the dollar and snapped two days of losses versus the euro after minutes of the Bank of England’s last meeting showed policy makers considered arguments for withdrawing emergency stimulus this month.

“People are a little bit uncertain,” said Niels Christensen, chief currency analyst at Nordea Bank AB in Copenhagen, the most accurate euro-dollar forecaster among 48 analysts surveyed by Bloomberg in the 18 months through June. “How equity markets are performing” will drive currencies, he said.

The yen appreciated 0.3 percent to 109.90 per euro as of 6:45 a.m. in New York and by the same percentage to 85.29 per dollar. The U.S. currency was little changed at $1.2896 per euro.

The yen gained 0.5 percent to 13.88 per Norwegian krone and 06 percent to 76.95 per Australian dollar.

The Stoxx Europe 600 Index lost 0.3 percent after gaining in the previous four days. Standard & Poor’s 500 Index futures lost 0.1 percent.

Benchmark interest rates in Norway and Australia are 2 percent and 4.5 percent compared with 0.1 percent in Japan and a range of between zero and 0.25 percent in the U.S, attracting investors to the nations’ higher-yielding assets.

Asset Purchases

The Fed may have to buy more assets if inflation keeps slowing, James Bullard, president of the Fed Bank of St. Louis, said yesterday in an article in the Wall Street Journal. The U.S. central bank plans to buy Treasuries due from August 2016 to August 2020 tomorrow, after purchasing $2.551 billion of securities yesterday.

“I suspect that both in the U.S. and in the U.K. we’re going to have to see very soon much more quantitative easing,” David Blanchflower, a former Bank of England policy maker, said in an interview today on Bloomberg Television’s “The Pulse” with Andrea Catherwood.

Sterling rose 0.4 percent to $1.5647 after declining to $1.5499, the weakest level since July 27. It advanced by 0.4 percent to 82.56 pence per euro.

Bank of England

The Monetary Policy Committee, led by Governor Mervyn King, voted 8-1 to keep the benchmark rate at 0.5 percent and their bond-purchase plan at 200 billion pounds ($313 billion), according to minutes of their Aug. 5 meeting released by the Bank of England today in London. Andrew Sentance pushed for an increase in the rate to 0.75 percent.

The currency fell yesterday after a report showed consumer inflation slowed in July. King said last week the outlook for the U.K. economy is weaker than in May, and “if it is necessary to respond, then we are quite prepared to do that.”

The Bank of Japan sees no immediate threat to the nation’s economy from the yen’s recent advance, Dow Jones Newswires reported yesterday, citing people familiar with the central bank’s thinking.

A ruling party lawmaker urged Prime Minister Naoto Kan’s government to immediately take steps to weaken the yen to 95 per dollar as the currency’s rally hurts the export-led economy.

‘Intervention is Necessary’

“Intervention is necessary to show that the government cannot accept the current level,” Yoichi Kaneko, a Democratic Party of Japan upper-house lawmaker, said today in an interview in Tokyo.

A stronger currency diminishes the competitiveness of Japanese goods overseas. The yen advanced to a 15-year high of 84.73 per dollar on Aug. 11.

“It is debatable that the strong yen is holding back Japan’s economy and secondly there’s very little that they can do about it anyway,” Steve Barrow, head of research for Group-of-10 currencies at Standard Bank Plc in London, said today in an e-mailed note. “The last bout of massive intervention, in 2003 and early 2004, failed to budge the yen.”

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