Yen Falls From Strongest Level Since 2002 as Stocks Advance

By Stanley White and Ye Xie

Oct. 24 (Bloomberg) -- The yen fell from the highest level against the euro since 2002 on speculation a rebound in U.S. stocks will slow sales of higher-yielding assets funded by low- cost loans in Japan's currency.

The dollar rose for the first day in four against the yen before data that may show a revival in existing home sales as U.S. lawmakers press for measures to curb mortgage foreclosures. The pound fell against the dollar and the euro before a government report that may show U.K. economic growth slowed.

``There could be more yen selling orders in the market,'' said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. ``U.S. homeowners are hurting, so any moves to help them are also positive for dollar sentiment.''

The yen traded at 126.14 per euro at 8:08 a.m. in Tokyo from 125.89 late yesterday in New York, when it touched 123.14, the strongest level since December 2002. The dollar rose to 97.63 yen from 97.31. The dollar traded at $1.2923 per euro after reaching $1.2728, the strongest level since November 2006. The yen may move between 125.65 and 126.75 per euro today, Soma forecast.

The pound fell to $1.6210 from $1.6230. It touched $1.6042 yesterday, the weakest since September 2003. It slid as much as 3.4 percent on Oct. 22, the biggest intraday decline since September 1992, when investor George Soros drove the currency out of Europe's system of linked exchange rates.

U.K. Economy

U.K. gross domestic product expanded 0.5 percent in the third quarter compared with a year ago, slower than the 1.5 percent growth in the previous quarter, the government may say today, according to a Bloomberg survey.

The Standard & Poor's 500 Index rose 1.3 percent yesterday, after falling as much as 4.3 percent, as a rebound in oil prices boosted shares of energy companies.

U.S. existing home sales rose 0.8 percent in September after a 2.2 percent decline in the previous month, data may show today, according to a separate survey. Federal Deposit Insurance Corp. Chairman Sheila Bair urged Congress to use loan guarantees to make it easier for homeowners to pay their mortgages.

The euro has fallen 20 percent versus the dollar since touching the all-time high of $1.6038 on July 15. The European economy may be headed for a recession that could last two to three years, Finland's Finance Minister Jyrki Katainen said on Oct. 22 in an interview on Bloomberg Television.

Net selling of European stocks among institutional investors has been three times higher than average over the past year, and foreign investors account for most of the sales, according to Samarjit Shankar, director of strategy for the global markets group in Boston at Bank of New York Mellon, the world's largest custodial bank with more than $23 trillion in assets under administration.

``One thing that stands out this week is huge European equity market outflows,'' said Shankar. ``Net selling is adding to pressure on the euro. Growth in the euro zone is deteriorating very fast.''

To contact the reporter on this story: Stanley White in Tokyo at swhite28@bloomberg.netYe Xie in New York at yxie6@bloomberg.net