Yen Gains on Speculation Exporters Buying It After Weekly Loss

By Ron Harui and Yasuhiko Seki

Feb. 6 (Bloomberg) -- The yen rose against the dollar on speculation its biggest drop in seven weeks yesterday encouraged local exporters to bring home some of their overseas earnings.

The dollar weakened on concern a government report today will show the U.S. jobless rate climbed to a 16-year high in January, adding to signs the recession is deepening in the world’s largest economy. Japan’s currency also strengthened versus the euro before a German report that may show industrial production fell for a fourth month, backing the case for the European Central Bank to cut interest rates further.

“Exporters came in to buy the yen as it reached attractive levels for them,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank by market value. “They were waiting for the yen to tumble to levels unseen by them in a while to purchase it.”

Japan’s currency advanced to 90.93 against the dollar as of 12:20 p.m. in Tokyo from 91.23 late yesterday in New York, when it fell 2 percent, the biggest drop since Dec. 18. The yen climbed to 116.22 per euro from 116.63. The currency is still headed for a second weekly loss versus the dollar and the euro.

The dollar traded at $1.2776 per euro from $1.2790 in New York yesterday. The pound traded at $1.4608 from $1.4610, and was at 87.47 pence per euro from 87.55 pence.

The yen’s 17 percent gain since the end of September has sapped earnings at exporters including Toyota Motor Corp., which is forecasting its first loss in 71 years. Keidanren business lobby Chairman Fujio Mitarai and Honda Motor Co. President Takeo Fukui have urged the Japanese government to sell the yen to limit its appreciation.

U.S. Unemployment

The dollar fell before a Labor Department report that will show U.S. unemployment climbed to 7.5 percent in January and payrolls fell by 540,000, according to a Bloomberg News survey of economists. The report is due at 8:30 a.m. in Washington.

The International Monetary Fund reiterated in a report released yesterday that U.S. gross domestic product will shrink 1.6 percent in 2009, Japan’s will contract 2.6 percent and the euro area will decline 2 percent.

“Today’s jobs report may revive concerns about the U.S. economy,” said Osamu Takashima, chief analyst for global market sales and trading in Tokyo at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan’s largest publicly listed lender. “The U.S. currency may be prone to selling pressure.”

Japan’s government isn’t considering printing new money, Finance Minister Shoichi Nakagawa said today. He was responding to a report in the Financial Times that ruling party lawmakers would today propose printing 50 trillion yen ($549 billion) of a new currency to be used to pay for stimulating the economy.

German Industrial Production

The euro headed for a sixth weekly decline versus the dollar, its longest losing stretch since August 2000, before a German report today that may show industrial output fell a seasonally adjusted 2.5 percent in December, after a 3.1 percent decline in November, a separate Bloomberg survey showed.

ECB President Jean-Claude Trichet signaled yesterday he may cut interest rates again next month to spur economic growth in the 16-nation region.

“Trichet noted that the euro-zone appears to be undergoing an extended downturn and did not rule out the possibility of another rate cut,” said Emmanuel Ng, an economist at Oversea- Chinese Banking Corp. in Singapore. “The markets may remain a seller of the euro” toward $1.2700 today, he said.

ECB policy makers left the main refinancing rate unchanged at 2 percent yesterday, in line with the median forecast of 53 economists surveyed by Bloomberg News.

The market may be “right” to bet on a reduction of a half-percentage point in March, while cutting to zero isn’t “appropriate at this stage,” Trichet told reporters following the decision.

To contact the reporter on this story: Ron Harui in Singapore at rharui@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net.