Yen Drops to Six-Month Low on Optimism Global Crisis Is Easing

By Ron Harui

April 13 (Bloomberg) -- The yen fell to a six-month low against Australia’s dollar on optimism the global financial crisis is easing, spurring investors to buy higher-yielding assets financed with the Japanese currency.

The yen also declined against the New Zealand dollar on speculation U.S. banks will this week post better-than-expected results for the first quarter, boosting demand for so-called carry trades. The euro approached a three-week low against the dollar on concern European Central bank officials will signal they may cut interest rates further.

“Risk-taking appetite may keep improving as first-quarter earnings at U.S. banks could prove to be good,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. “The bias would be for the yen to be sold” to 101 against the dollar and 132.50 per euro today, he said.

The yen weakened to 72.52 against Australia’s dollar as of 10:06 a.m. in Tokyo from 72.13 in New York on April 10. It touched 73.10, the weakest level since Oct. 14. Japan’s currency fell to 58.69 per New Zealand dollar from 58.46. It traded at 100.44 versus the U.S. dollar from 100.30, and was little changed at 131.08 per euro from 132.18.

The euro dropped to $1.3147 from $1.3189 on April 10 when it reached $1.3090, the lowest level since March 18. Europe’s currency was at 89.93 British pence from 89.84 pence. Against the pound, the dollar gained to $1.4616 from $1.4672.

Exchange-rate movements may be more volatile than normal today as the Easter Monday holiday in Asia and Europe reduces the volume of trading, Saito said.

Goldman Sachs

Japan’s currency also declined as Asian stocks rose. The MSCI Asia-Pacific Index of regional shares advanced 0.3 percent, a third day of gains.

Goldman Sachs Group Inc. will release its first-quarter results tomorrow and JPMorgan Chase & Co. will disclose its first-quarter earnings on April 16. Wells Fargo & Co., the second-largest U.S. home lender, said last week first-quarter net income surged 50 percent because of “strong” revenue from Wachovia Corp., which it acquired last year.

Goldman is considering announcing a share sale as early as tomorrow, to speed repayment of $10 billion in government money, the Wall Street Journal reported April 10, citing unidentified people familiar with the matter.

In carry trades, investors get funds in a country with low borrowing costs and invest in another with higher interest rates. The risk is that market moves can erase those profits. The benchmark rate is 0.1 percent in Japan, compared with 3 percent in Australia and in New Zealand.

ECB Policy Makers

The euro extended last week’s losses on speculation ECB policy makers will signal they intend to lower borrowing costs for a fourth time this year when they meet next month.

ECB President Jean-Claude Trichet said last week the bank is studying unorthodox ways of bolstering the 16-nation region’s economy, while council member Nout Wellink said the central bank can make additional cuts to its 1.25 percent rate. Fellow members Axel Weber will speak in Hamburg on April 15 and Erkki Liikanen will speak in Helsinki the following day.

“ECB officials such as Trichet are now talking about the possibility of rates below 1 percent and unconventional monetary easing steps,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The euro is likely to weaken” to $1.3115 and 131.55 yen today, he said.

Investors last week raised bets the ECB will reduce rates at its May 7 meeting. The yield on the three-month Euribor interest-rate futures contract for May delivery fell to 1.31 percent on April 9 from 1.39 percent on April 3, according to data compiled by Bloomberg.

To contact the reporters on this story: Ron Harui in Singapore at rharui@bloomberg.net.