Yen Falls a Second Day as Risk Sentiment Increases Yield Demand

By Anna Rascouet and Yasuhiko Seki

Dec. 11 (Bloomberg) -- The yen weakened for a second day against the euro as signs the global economy is improving boosted demand for higher-yielding assets.

Japan’s currency dropped against all 16 most-traded currencies before U.S. reports today that may show retail sales rose for a second month and consumer confidence rebounded. Australia’s dollar headed for a second weekly gain after data showed China’s exports fell the least in 14 months. The pound strengthened after Moody’s Investors Service said it had no plans to revise the U.K.’s top credit rating.

“The Chinese numbers weren’t bad and stocks worldwide are performing well” said David Deddouche, a currency strategist at Societe Generale SA in Paris. “After a bit of stress at the beginning of this week, things are calming down, so the yen tends to weaken as a consequence.”

The yen depreciated to 130.92 per euro as of 8:39 a.m. in London, from 129.94 yesterday in New York, paring its weekly gain to 2.8 percent. The currency weakened to 88.83 per dollar from 88.20. The dollar was at $1.4740 per euro, from $1.4732.

U.S. retail sales gained 0.6 percent in November after climbing 1.4 percent the prior month, according to a Bloomberg News survey before today’s Commerce Department report. The Reuters/University of Michigan preliminary index of consumer sentiment rose to 68.8 for December, from 67.4 a month earlier, according to a separate Bloomberg survey before today’s report.

Interest Rates

The yen dropped 2.7 percent against the dollar this month and 0.6 percent versus the euro as signs of a global economic recovery encouraged investors to seek higher-yielding currencies. Japan’s key interest rate is 0.1 percent, compared with rates of 3.75 percent in Australia and 2.5 percent in New Zealand.

Chinese industrial production grew 19.2 percent in November from a year earlier, the statistics bureau said in Beijing. That compared with a 16.1 percent increase in October. Exports fell 1.2 percent in November and imports surged 26.7 percent.

Australia’s currency strengthened for a second day versus the yen after the Chinese reports spurred speculation the country will benefit as demand for its commodities grows. Australia is China’s main trading partner.

The Aussie was at 91.56 U.S. cents, from 91.66 cents yesterday, for a 0.1 percent gain this week. It advanced 0.6 percent to 81.31 yen.

The Nikkei 225 Stock Average gained 2.5 percent and the MSCI World Index of shares advanced 0.4 percent today as the Chinese data added to evidence of a global economic recovery. Standard & Poor’s 500 Index futures added 0.6 percent.

The pound rose the most in a week against the yen and the dollar after Moody’s Investors Service said it has no current plans to lower its top debt ratings on the U.K. and the U.S.

‘Stable’ Outlook

“The outlook is stable” for the two countries, Moody’s Senior Vice President Tom Byrne said in an interview in Singapore today. Byrne was citing comments by Steven Hess, vice president and senior credit officer of the sovereign ratings group for the company, made in a teleconference today.

The pound gained to 145.05 yen, from 143.59 yesterday, and rose traded at $1.6326, from $1.6279. The U.K. currency dropped 2.2 percent against the yen on Dec. 8 after Moody’s said its ratings on the U.S. and the U.K. may “test the Aaa boundaries.”

“A rating warning from Moody’s drove the pound lower earlier this week and soothing comments from the same company triggered a knee-jerk buy-back of the currency today,” said Kazumasa Yamaoka, a senior analyst in Tokyo at GCI Capital Co., a foreign-exchange margin-service company.

Euro Decline

The euro headed for a second weekly decline against the dollar, the longest stretch in two months, on speculation the credit ratings of more European nations will be lowered.

Spain had the outlook on its AA+ debt rating cut to “negative” from “stable” by Standard & Poor’s this week. Greece’s credit was reduced one step to BBB+ by Fitch Ratings. Portugal’s outlook was also revised to “negative” from “stable” by S&P.

“There are lingering concerns about the health of the eurozone,” said Danica Hampton, a currency strategist at Bank of New Zealand Ltd. in Wellington. “These worries are taking the shine off the euro.”

To contact the reporters on this story: Anna Rascouet in London at arascouet@bloomberg.net; Yasuhiko Seki in Tokyo at yseki5@bloomberg.net