Yen May Rise Through March on Inflows, Barclays Says

By Garfield Reynolds and Stanley White

Jan. 30 (Bloomberg) -- The Japanese yen may extend gains through to the end of the country’s fiscal year on March 31 as exporters buy the currency to hedge revenues and money managers bring funds home amid the global slump, Barclays Capital said.

The yen also may strengthen as investors unwind so-called carry trades, where they borrowed in the currency to invest in nations where benchmark interest rates exceed Japan’s 0.1 percent. Barclays reiterated its forecast for the yen to rise to 84 in three months, according to the report.

“We expect even further yen appreciation toward the Japanese fiscal year end in March as both corporate hedging and investor repatriation flows support the currency,” Toru Umemoto, chief currency strategist in Tokyo at Barclays Capital, wrote in a note to clients. “We believe the dollar will decline.”

The Japanese currency traded at 89.74 per dollar as of 9:27 a.m. in Tokyo from 90.03 late yesterday in New York. The yen has gained 1 percent against the greenback this month, following a 23 percent rally last year, as $1 trillion in losses on mortgage-related securities at financial institutions worldwide and a seizure in credit markets prompted investors to reduce their holdings of riskier assets.

Japan’s Finance Ministry is unlikely to shield the country’s exporters from a rising currency by ordering the Bank of Japan to intervene and sell the yen, Barclays said.

There’s too much risk of political backlash from the U.S., which has given its carmakers federal aid as they struggle with declining sales during the worst global recession since the Great Depression, Umemoto said.

To contact the reporter on this story: Garfield Reynolds in Sydney at greynolds1@bloomberg.net; Stanley White in Tokyo at swhite28@bloomberg.net.