Yen Falls Versus Australian, N.Z. Dollars as Crisis Seen Easing

By Kim-Mai Cutler and Ron Harui

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

The yen also declined as Bank of Japan Deputy Governor Hirohide Yamaguchi said today monetary policy alone isn’t enough to end the economic slump. The Japanese currency slid against all of its 16 most-actively traded counterparts. Thailand’s baht fell to its weakest level this month after anti-government protesters fought police and Prime Minister Abhisit Vejjajiva declared a state of emergency.

“The 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.”

The yen dropped to 72.87 against Australia’s dollar as of 10:09 a.m. in London from 72.11 in New York on April 10. It touched 73.02, the weakest since Oct. 14. The yen fell to 58.93 per New Zealand dollar, from 58.44.

Japan’s currency declined to 100.64 versus the greenback from 100.24, and dropped to 132.92 per euro, from 132.18. The euro traded at $1.3208, from $1.3189 on April 10 when it reached $1.3090, the lowest level since March 18.

Yen Forecast

The yen may depreciate to 101 per dollar today, Saito said. Exchange-rate movements may be more volatile than normal today, he said, as the Easter Monday holiday in Asia and Europe reduces the volume of trading.

Yamaguchi said monetary policy alone would not end the economic slump in comments to the Japanese Diet today.

“The Bank of Japan is hinting that they want to look at other non-standard measures,” said Geoffrey Yu, a London-based foreign-exchange strategist for UBS AG, the world’s second- biggest currency trader. “The yen is weakening as they may be referring to additional fiscal policy measures or other alternatives.”

Asian stocks rose, with the MSCI Asia Pacific Index advancing 0.3 percent, a third day of gains.

“The yen as a funding currency for carry trades or investment opportunities is going to reassert itself,” Jesper Koll, Tokyo-based chief executive officer of hedge fund adviser TRJ Tantallon Research Japan, said in an interview with Bloomberg Television. “For all intents and purposes, the yen ought to be weakening, particularly against the Australian and New Zealand dollars.”

Carry Trades

In carry trades, investors get funds in a country with relatively low borrowing costs and invest in another with higher interest rates. The risk is 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.

The Thai baht extended its loss in offshore trading this year to 2.5 percent as soldiers battled to restore order to Bangkok’s streets. Protesters are calling for the resignation of Abhisit, 44, who was forced to cancel a weekend summit of Asian leaders after 1,000 protesters stormed the seaside venue.

The currency fell to 35.67 against the dollar, from 35.43 on April 10.

Goldman Sachs Group Inc. will release its first-quarter results tomorrow and JPMorgan Chase & Co. will report its first- quarter earnings April 16. Wells Fargo & Co., the second-largest U.S. home lender, said on April 9 that first-quarter net income surged 50 percent because of “strong” revenue from Wachovia Corp., which it acquired last year.

ECB Comments

The euro may extend last week’s losses against the dollar on speculation European Central Bank policy makers will signal this week that they intend to cut rates for a fourth time this year 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 deliver a speech in Helsinki the following day.

“ECB officials 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.

Rate Futures

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.

Declines in the yen may be tempered by speculation a stimulus plan announced last week by Japanese Prime Minister Taro Aso will help the world’s second-largest economy emerge from its recession.

The 15.4 trillion yen ($153 billion) package, unveiled on April 10, includes 3 trillion yen to support corporate financing, 1.9 trillion yen to create jobs and 370 billion yen to subsidize new car purchases.

“The package should contribute around 1.5 to 2 percentage points to economic growth for fiscal 2009,” Ashley Davies, a Singapore-based currency strategist at UBS, wrote in a note today. “Fiscal stimulus packages are positive for a currency, but investors will likely be worried about Japan’s total government debt as a share of gross domestic product.”

The stimulus plan will add to Japan’s debt burden that the Organization for Economic Cooperation and Development already forecasts will rise to 197 percent of GDP next year.

‘Currency Crisis’

Demand for the dollar may weaken after Jim Rogers, Singapore-based chairman of Rogers Holdings, said a “currency crisis” may occur in the world’s largest economy.

“What we haven’t had yet is a big currency crisis,” Rogers said today in a Bloomberg Television interview. “I would expect that’s coming next because there are many currency imbalances, with the U.S. now the largest debtor nation in the world.”

The U.S. budget deficit climbed to $192.3 billion in March, compared with a shortfall of $48.2 billion a year earlier, according to government data. Spending increased to $321.2 billion, and revenue fell 28 percent to $129 billion.

The Dollar Index, which the ICE uses to track the greenback against the euro, yen, pound, Canadian dollar, Swiss franc and Swedish krona, fell 0.3 percent today to 85.517.

To contact the reporters on this story: Kim-Mai Cutler in London at kcutler@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.