Yen Trades Near One-Week Low Versus Euro as Asian Stocks Gain

By Yasuhiko Seki and Ron Harui

July 15 (Bloomberg) -- The yen traded near a one-week low against the euro as Asian stocks rose before a U.S. report today that economists say will show industrial production shrank at a slower pace, adding to signs the worst of the recession is over.

Japan’s currency fell against 12 of the 16 major currencies after Intel Corp.’s revenue forecast beat estimates and Goldman Sachs Group Inc. reported higher-than-expected earnings, damping demand for safer assets. South Korea’s won and the Indonesian rupiah led Asian currencies higher against the dollar as stock gains boosted demand for emerging-market investments.

“Rising equities will certainly lead to risk taking,” said Shinichi Hayashi, a Tokyo-based foreign-exchange dealer at Shinkin Central Bank, the central institution for Japan’s financial co-operatives. “U.S. data may spur hopes for an economic recovery. The bias is for selling the yen.”

The yen traded at 130.79 per euro as of 10:47 a.m. in Tokyo from 130.62 yesterday in New York. It earlier dropped to 130.96, the weakest since July 8. The dollar was at $1.3982 per euro from $1.3967. The yen bought 93.55 versus the dollar from 93.50. The greenback fell to $1.6332 per pound from $1.6308.

The won strengthened 0.6 percent to 1,285.35 per dollar and the Indonesian rupiah gained 0.5 percent to 10,160.

Asian currencies gained as the Nikkei 225 Stock Average rose 0.3 percent and the MSCI Asia Pacific Index of regional shares advanced 0.6 percent. Stocks climbed after a U.S. report yesterday showed retail sales increased last month more than economists expected.

U.S. factory production fell 0.6 percent in June after a 1.1 percent drop in May, according to a Bloomberg News survey before the Federal Reserve releases the report today.

Industrial Output

Demand for the yen weakened after Intel forecast sales will reach as much as $8.9 billion in the current quarter, surpassing the $7.86 billion estimated by analysts surveyed by Bloomberg. Goldman Sachs said net income in the three months ended June 26 was $3.44 billion, or $4.93 a share, the bank said. That surpassed the $3.65 per-share average estimate of analysts.

“There is a sense that optimism-driven trading is re- emerging,” said Daisuke Uno, chief strategist in Tokyo at Sumitomo Mitsui Banking Corp., a unit of Japan’s third-largest banking group. “The forecast-beating results from Goldman Sachs and Intel suggest the yen will weaken and stocks will advance.”

JPMorgan Chase & Co. and International Business Machines Corp. are among other companies in the Standard & Poor’s 500 Index due to report results this week.

China’s Reserve

The dollar declined for a third day against the pound after China’s foreign-exchange reserves topped $2 trillion for the first time, reviving concerns the Asian nation may shift its assets away from the U.S. currency.

China’s reserves rose a record $178 billion in the second quarter to $2.132 trillion, the People’s Bank of China said today on its Web site. That compares with a $7.7 billion gain in the previous three months.

“The foreign-exchange diversification story may come back,” said Lee Wai Tuck, a currency strategist at Forecast Pte in Singapore. “China is likely to say more about diversifying out of the dollar. It’s a bit dollar-negative.”

Premier Wen Jiabao said in March that he was “worried” about his country’s $763.5 billion of Treasuries as the U.S. sells record amounts of debt to fund stimulus spending, threatening the value of the dollar.

The Bank of Japan will keep its target interest rate at 0.1 percent at a policy meeting ending today, according to a Bloomberg News survey of economists.

To contact the reporters on this story: Ye Xie in New York at yxie6@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net.