Yen Declines Against Euro as Earnings Optimism Boosts Stocks

By Lukanyo Mnyanda and Yoshiaki Nohara

Sept. 10 (Bloomberg) -- The yen fell for a sixth day against the euro as prospects for improved company earnings buoyed stocks, reducing demand for Japan’s currency as a refuge.

The yen declined most versus the Taiwanese dollar and South Korean won after Texas Instruments Inc. raised its third-quarter profit forecast and China Yurun Food Group Ltd. reported increased earnings. The dollar traded near the lowest level since December against the euro on speculation Federal Reserve officials will signal they plan to keep borrowing costs near zero. The pound fell against the dollar before the Bank of England decides whether to increase its asset-purchase program.

“The risk aversion bubble is bursting,” said Neil Jones, head of European hedge fund sales in London at Mizuho Corporate Bank Ltd. “People have too much money doing nothing. The yen will stay under pressure against the crosses, less so against the dollar.”

The yen fell to 134.12 per euro as of 9:44 a.m. in London from 133.99 in New York yesterday, when it touched 134.41 yen, the lowest since Aug. 28. The dollar was unchanged at $1.4557 per euro, after sinking to $1.4601 yesterday, the weakest level since Dec. 18. Japan’s currency was at 92.13 per dollar from 92.04 after hitting 91.61 yesterday, the highest since Feb. 17.

The MSCI Asia Pacific Index of regional shares gained 1.3 percent and Europe’s Dow Jones Stoxx 600 Index advanced 0.3 percent, a day after the Standard & Poor’s 500 Index climbed to an 11-month high. U.S. stock futures also rose.

Dollar Index Falls

The Dollar Index, which IntercontinentalExchange Inc. uses to track the currency against the euro, yen, pound, Swiss franc, Canadian dollar and Swedish krona, was near the lowest level in almost a year before speeches by Atlanta Fed President Dennis Lockhart and Fed Vice Chairman Donald Kohn. The index was unchanged at 77.064 today, after dropping yesterday to as low as 76.803, the weakest level since Sept. 26, 2008.

“Everything we’ve heard suggests rates are going to stay low, and that does nothing for the dollar,” said Gavin Friend, a markets strategist at National Australia Bank in London. “We’re going to see all the major currencies pushing higher against the dollar.”

Chicago Fed President Charles Evans said yesterday it’s too early for the Fed to tighten credit, suggesting interest rates in the world’s largest economy will remain near zero. Dallas Fed President Richard Fisher repeated his forecast for a “prolonged period of sluggish economic performance.”

To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net