Yen Weakens for Second Day Against Euro as Asian Stocks Advance

By Yasuhiko Seki and Ron Harui

July 14 (Bloomberg) -- The yen fell for a second day against the euro as Asian stocks rose amid speculation Goldman Sachs Group Inc. will report stronger earnings today, spurring investors to increase holdings of higher-yielding assets.

The yen declined against all of the 16 major currencies after New Zealand’s Reserve Bank Governor Alan Bollard said “early signs of a global recovery have emerged” and an Australian report showed business sentiment turned positive. South Korea’s won climbed the most in two months against the greenback after a rally in U.S. stocks bolstered demand for emerging-market investments. The Singapore dollar advanced after the government raised its economic forecast.

“If we look at the trend of the economy and profits, it is evident that we have already gone through the worst of the recession,” said Yousuke Hosokawa, a senior currency dealer in Tokyo at Chuo Mitsui Trust & Banking Co., a unit of Japan’s seventh-largest banking group. “When the underlying risk appetite is improving, there is little reason to buy the yen.”

The yen dropped to 130.54 per euro as of 7:34 a.m. in London from 129.95 yesterday in New York. It fell 0.7 percent to 73.36 per Australian dollar, and weakened 0.6 percent to 59.10 per New Zealand dollar. The yen traded at 93.23 per dollar from 92.97. The euro rose to $1.3997 from $1.3978.

The yen weakened as the Nikkei 225 Stock Average rose 2.3 percent and the MSCI Asia-Pacific Index of regional shares climbed 2.3 percent, the biggest gain in a month.

Goldman Sachs

Goldman Sachs will probably say it earned $2.2 billion in the three months through June when it reports second-quarter earnings today, according to the average estimate of analysts surveyed by Bloomberg. Goldman, JPMorgan Chase & Co. and International Business Machines Corp. are among more than 30 companies in the Standard & Poor’s 500 Index due to report results this week.

The S&P Index rose the most in six weeks yesterday after analyst Meredith Whitney gave Goldman Sachs the only “buy” recommendation among the eight companies she covers. She told CNBC the New York-based financial institution is going to “surprise big.”

The New Zealand dollar rose for a second day against the yen after the central bank governor said the nation’s economy is likely to start recovering earlier than many of its trading partners.

“We hope that in the next phase of recovery in financial- market sentiment and return to risk seeking, the markets will be more discriminating about New Zealand,” Bollard said in notes for a speech delivered today in Napier.

Sentiment Index

Australian business sentiment index rose 6 points to 4, after holding below zero for the previous 17 months, according to a National Australia Bank Ltd. survey released in Sydney today. A figure above zero shows optimists outnumber pessimists.

Benchmark interest rates are 2.5 percent in New Zealand and 3 percent in Australia, compared with as low as zero in the U.S. and 0.1 percent in Japan, attracting investors to the South Pacific nations’ assets. The risk in such trades is that currency moves can erase profits.

The won rebounded from a two-month low as the Kospi index climbed for the first time in a week. The South Korean government will report preliminary second-quarter gross domestic product figures on July 24.

“Most of the markets are a little higher today, after the rebound on Wall Street overnight,” said David Cohen, an economist with Action Economics in Singapore. “A lot of the GDP reports coming out over the next month will be positive. The mood is a little relieved.”

The won closed 1.8 percent higher at 1,293.25 versus the dollar, the biggest advance since April 30. The Kospi index advanced 0.5 percent.

Singapore Dollar

The Singapore dollar rose the most in two weeks after the government said gross domestic product rose an annualized 20.4 percent last quarter from the previous three months. Economists surveyed by Bloomberg forecast a 13.4 percent expansion.

“We treat this number as a positive,” said Chia Woon Khien, a strategist at Royal Bank of Scotland Group Plc in Singapore. “The central bank is very unlikely to weaken the Singapore dollar any further and the next move will be up, but that may not be till 2010.”

GDP will shrink 4 percent to 6 percent this year, less than an earlier forecast for a contraction of as much as 9 percent, the trade ministry said in a statement today.

Singapore’s dollar gained 0.4 percent versus the U.S. currency to S$1.4592 from late in Asia yesterday.

German Sentiment

The euro rose for a second day against the dollar before a German report that economists said will show investor confidence climbed to a three-year high.

Sentiment increased to 47.8 this month from 44.8 in June, according to a Bloomberg News survey of economists. The reading would be the highest since May 2006. The ZEW Center for European Economic Research releases its index of investor and analyst expectations today.

“Risk appetite is recovering,” said Yuji Saito, head of the foreign-exchange group in Tokyo at Societe Generale SA, France’s third-largest bank. “The bias is for the yen to be sold.”

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