Yen Gains Versus Major Peers as China Vows to Curb ‘Hot Money’

The yen rose against all of the most- traded currencies after China said it will curb capital flows into its economy.

The euro pared losses versus the yen after a Greek bond auction eased European sovereign-debt concern. The yuan reached a two-week high as some investors speculated China may also raise interest rates before a meeting of Group of 20 leaders this week. The dollar fell against most major counterparts as stocks rose.

“The Japanese yen has got some strength, and some of it is attributed to comments made out of China with respect to investments abroad,” said Jack Spitz, managing director of foreign exchange at National Bank of Canada in Toronto. “With equities trading stronger, risk is on and the dollar is weaker.”

The yen advanced 0.7 percent to 112.26 per euro at 9:11 a.m. in New York, from 113.01 yesterday. It touched 111.73, the strongest level since Oct. 29. The Japanese currency gained 0.7 percent to 80.64 per dollar. The euro was little changed at $1.3919, compared with $1.3920 yesterday, after earlier declining to $1.3824, the weakest since Oct. 29.

The Stoxx Europe 600 Index gained as much as 0.8 percent to a two-year high after better-than-expected earnings reports from Adecco SA and Barclays Plc. Futures on the Standard & Poor’s 500 Index rose 0.2 percent.

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.

Greek Auction

Investors bid for 5.15 times the securities offered at a Greek auction of 390 million euros ($543 million) of 26-week Treasury bills, the Public Debt Management Agency in Athens said. The offering drew a yield of 4.82 percent, it said.

“It was fairly well received,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co. in New York. “The euro had seen three or four days of declines and that helped a little bit.”

The extra yield, or spread, investors demand to hold Portuguese and Irish 10-year bonds instead of comparable German bunds climbed to records. The spread on Portugal’s 10-year bonds over German debt widened to 452 basis points, or 4.52 percentage points. The spread on Irish 10-year securities over bunds reached 554 basis points.

Japan’s currency rose for a third day versus the euro, the longest stretch in three weeks.

Franc Gains

The Swiss franc pared an advance versus the euro after the nation’s consumer confidence unexpectedly worsened in October. An index based on a quarterly survey of about 1,100 households fell to 7 from 16 in July, the State Secretariat for Economic Affairs in Bern said in a statement today. That’s the lowest since January. Economists forecast a gain to 17, the median of eight estimates in a Bloomberg News survey showed.

The franc gained 0.3 percent to 1.3405 per euro after earlier climbing to 1.3325, its strongest level since Oct. 20. It appreciated 0.3 percent against the dollar to 96.28 centimes.

Asian economies may need to use capital controls as quantitative easing by the U.S. threatens to spur asset bubbles in the region’s stock, currency and property markets, according to the World Bank. Such curbs should be “targeted,” temporary and tailored to address specific problems, Sri Mulyani Indrawati, a World Bank managing director, said in an interview. This may include countries tying up funds for as long as a year to help limit hot-money flows, she said.

The yuan gained after the People’s Bank of China raised the currency’s reference rate by 0.17 percent to 6.6580 today, the biggest increase in three weeks. The yuan appreciated 0.6 percent to 6.6434 per dollar, the strongest since Oct. 21.

G-20 leaders will avoid setting specific targets for current-account surpluses and deficits at the Nov. 11-12 summit in Seoul, an aide to South Korean President Lee Myung Bak said.

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