Yen Falls as Rebound in Equity Markets Blunts Demand for Safety

By Lukanyo Mnyanda

Sept. 9 (Bloomberg) -- The yen dropped against the euro and the dollar as a rebound in European equities reduced demand for Japan’s currency as a refuge.

The yen fell the most against the South Korean won and the British pound as Europe’s Dow Jones Stoxx 600 Index headed for a fifth day of gains. The pound advanced against 13 of the 16 most-traded currencies as a report showed U.K. consumer confidence rose to the highest level in more than a year. The Swedish krona snapped three days of gains against the euro after Moody’s Investors Service cut the long-term debt ratings of the nation’s lenders, including Nordea Bank AB.

“When risk appetite picks up Japanese investors will look for higher yields and that should pressure the yen in coming months,” said Lutz Karpowitz, a currency strategist at Commerzbank AG in Frankfurt. “Carry trades are more attractive already.”

The yen slipped 0.3 percent to 134.07 per euro as of 6:36 a.m. in New York. It weakened 0.2 percent to 92.48 against the dollar. The pound rose 0.3 percent to 152.63 yen. The dollar slipped 0.1 percent to $1.4495 against the euro. It reached the weakest level since Dec. 18 yesterday.

The krona weakened to 10.2153 per euro, from 10.1999 yesterday. Sterling increased to $1.6510, from $1.6490.

Europe’s Stoxx 600 index climbed 0.3 percent, recovering from a decline of 0.5 percent. The regional gauge has surged 51 percent since March 9, when it touched the lowest level this year. Futures on the Standard & Poor’s 500 Index were little changed after slipping 0.6 percent.

Consumer Prices

The yen dropped even as consumer prices in Germany, calculated using a harmonized European Union method, fell 0.1 percent from a year earlier after dropping 0.7 percent in July, according to the Federal Statistics Office in Wiesbaden today. A recovery in France, the second-largest euro-area economy, remains fragile, European Central Bank governing council member Christian Noyer said today on Europe 1 radio.

The yen may rise against the dollar as it’s replaced as the favored currency for so-called carry trades, according to Royal Bank of Scotland Group Plc.

“Over the next few months we see the yen strengthening against the dollar and European currencies,” Greg Gibbs, a foreign-exchange strategist in Sydney, said today in a report. “We expect the yen to continue to be replaced by the dollar, and even possibly European currencies, as the preferred funding vehicle for higher-risk, higher-yielding assets and currencies.”

To contact the reporters on this story: Lukanyo Mnyanda in London at lmnyanda@bloomberg.net