Japanese Yen Rises as Stock-Market Losses Boost Risk Aversion

By Lukanyo Mnyanda

June 27 (Bloomberg) -- The yen rose against the euro and the dollar, erasing earlier losses, as a decline in stock markets around the world reduced demand for higher-yielding assets funded in Japan.

The Japanese currency also erased a weekly decline against the euro after European Central Bank council member Miguel Angel Fernandez Ordonez said an interest-rate increase next month ``is not certain'' and the Bloomberg purchasing managers index showed European retail sales plunged in June. The Swiss franc gained for a third day against the dollar.

``We're finally seeing some catch-up in terms of the rising risk aversion in other markets feeding into currencies,'' said Adam Cole, global head of currency strategy in London at Royal Bank of Canada, the nation's largest lender. ``That's leading to strengthening in the safe-haven currencies and the yen has been the main beneficiary so far.''

Japan's currency gained as much as 0.6 percent, its biggest advance since June 16, to 167.23 per euro and was at 167.51 as of 9:49 a.m. in London, from 168.30 yesterday in New York, when it touched a record low of 169.46. It traded at 106.26 against the dollar, from 106.81. The euro traded at $1.5764, from $1.5757 yesterday and $1.5606 a week ago. The dollar fell to 1.0190 Swiss franc, from 1.0238.

The MSCI World Index of stocks dropped for a second day, losing 0.5 percent, while Europe's Dow Jones Stoxx 600 Index sank 1.1 percent. The decline in Asian and European stocks came after the Dow Jones Industrial Average yesterday plunged more than 3 percent amid concern rising oil prices and credit-market writedowns will curb company profits.

To contact the reporter on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net
Last Updated: June 27, 2008 04:54 EDT