Yen Rises as Bank Woes Sap Demand for Higher-Yield Currencies

By Anna Rascouet

Nov. 3 (Bloomberg) -- The yen advanced as stocks fell on evidence banks and companies are struggling to shake off the effects of the global recession, damping demand for higher- yielding currencies.

The yen gained most against the Australian dollar and the British pound after UBS AG reported a wider-than-estimated loss and profit at Germany’s Metro AG slumped, sending the MSCI World Index down 0.5 percent. The rand climbed against all 16 most- traded currencies tracked by Bloomberg as gold approached a record high. The Aussie tumbled as the central bank raised interest rates without signaling faster increases to come.

“Risk markets have gone too much, too fast,” said Geoffrey Yu, a currency strategist in London at UBS, the world’s second-largest foreign-exchange trader. Markets “can’t expect good days to continue indefinitely, especially in this environment. People are right to be cautious.”

The yen strengthened to 90.07 per dollar as of 7:58 a.m. in London, from 90.21 yesterday in New York. It appreciated to 132.96 per euro, from 133.32. The South African rand traded at 7.9037 per dollar, from 7.9653. The Australian dollar dropped to 89.66 U.S. cents, from 90.40.

To contact the reporters on this story: Anna Rascouet in London at arascouet@bloomberg.net