By Yasuhiko Seki and Ron Harui Jan. 5 (Bloomberg) -- The yen rose the most in four weeks against the dollar on speculation some of the nation’s exporters took advantage of its declines to covert overseas earnings back into their own currency. The Japanese currency, which dropped for four straight days last week, also gained versus the euro, pound and Swiss franc as Asian stocks advanced. The South Korean won traded at a 15-month high against the dollar. The U.S. currency fell versus the yen and traded at its lowest level in almost three weeks versus the euro earlier as traders pared bets on the outlook for interest- rate increases by the Federal Reserve. “There’s talk of large-sized buying of yen by exporters,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. Ltd. in Tokyo. “There’s also sentiment that the yen’s slump in December was excessive, so the currency is being bought back.” The yen strengthened to 92.08 per dollar as of 8:37 a.m. in London from 92.50 in New York yesterday, after earlier gaining 06 percent, the biggest gain since Dec. 8 based on closing prices. The Japanese currency appreciated to 132.68 per euro, from 133.34 yesterday, when it traded at 133.79, the weakest since Dec. 7. The dollar was at $1.4416 per euro, from $1.4413, after trading at $1.4484, the weakest since Dec. 17. Large Japanese manufacturers expect the yen to average 91.16 per dollar in the six months to March 2010, according to the Bank of Japan’s quarterly Tankan survey released last month. The yen also rose against 15 of the 16 major currencies after Reuters reported, without citing named sources, that Sumitomo Mitsui Financial Group Inc. will decide as early as tomorrow to raise some 800 billion yen ($8.7 billion) to increase its capital base. Technical Chart “Talks of new share issues by SMFG added to the rising momentum of the yen,” said Takashi Kudo, general manager of market information service in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. Declines last week drove the yen’s 14-day relative strength index to more than 70, a level that typically indicates a change in direction is imminent. It was at 59.1 today, according to data compiled by Bloomberg. “There is an emerging view that recent sell-offs of the yen against higher-yielding currencies have gone too far according to technical charts,” said Shuzo Kakuta, senior foreign-exchange adviser at Tokyo Tomin Bank Ltd. Fed Funds Futures The dollar fell versus the yen as futures trading in Chicago showed a 51 percent chance the Fed will increase its target rate for overnight bank loans by at least a quarter- percentage point by its June meeting, compared with 60 percent odds the previous working day. “The dollar has started 2010 on the back foot,” said Danica Hampton, senior strategist of markets at Bank of New Zealand Ltd. in Wellington. “Upbeat global data and buoyant equity markets have seen investors flock to growth sensitive currencies and away from the greenback.” Fed Governor Elizabeth Duke said yesterday that inflation will likely be “subdued,” and expectations for prices should remain stable because parts of the economy will run below capacity. A Commerce Department today may show U.S. factory orders gained 0.5 percent in November after rising 0.6 percent the prior month, according to the median estimate of 58 economists in a Bloomberg survey. “The pricing of the Fed funds futures seem particularly aggressive and at risk of some disappointment,” analysts led by Marc Chandler, global head of currency strategy at Brown Brothers Harriman & Co., wrote in a research note yesterday. “And that risk, if realized, would likely be seen as dollar negative.” Won’s Gains The won strengthened 1.2 percent to 1,140.50 per dollar after trading at 1,136.20, the strongest level since September 2008. The MSCI Asia-Pacific Index of shares climbed 1.1 percent. “Korea will be on everyone’s mind when they look at Asia as an investment outlet in the New Year, with the region expected to outperform global growth,” said David Cohen, an economist at Action Economics in Singapore. “The Korean won should be one of the stronger performers.” To contact the reporters on this story: Yasuhiko Seki in Tokyo at yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net

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