BLBG: Yen Rises as Drop in Stocks Reduces Demand for Higher Yields
By Ben Levisohn and Matthew Brown
March 9 (Bloomberg) -- The yen advanced against all of its most-traded counterparts as a drop in stocks reduced demand for higher-yielding assets.
Japan’s currency got a boost on speculation companies repatriated profits before the end of the fiscal year in April. Sterling dropped against the dollar and euro as a U.K. house price gauge showed fewer increases in values last month than economists forecast and Moody’s Investors Service said banks’ creditworthiness may be at risk.
“Risk sentiment has soured a little bit,” said Omer Esiner, a senior currency analyst in Washington at Travelex Global Business Payments, a currency exchange network. “We can see that in declines in global equities and riskier currencies. In an otherwise quiet market, repatriation will underpin the yen.”
The yen strengthened 1.3 percent to 121.59 per euro at 8:28 a.m. in New York, from 123.13 yesterday. Japan’s currency gained 0.6 percent to 89.76 per dollar, from 90.31 The euro dropped 0.6 percent to $1.3547, from $1.3634. Sterling slid 0.8 percent to $1.4939 and declined 0.2 percent to 90.65 pence per euro.
Standard & Poor’s 500 Index futures dropped 0.3 percent a year after the index closed at a 12-year low. The equity benchmark has rallied 68 percent since then.
In the past year, IntercontinentalExchange Inc.’s Dollar Index, which tracks the greenback against the currencies of six major U.S. trading partners including the euro, yen and pound, has fallen 9.3 percent. The yen strengthened 10 percent against the dollar over the same period.
Manufacturers’ View
Japan’s large 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. A stronger yen erodes the profits of exporters.
“There’s talk of more repatriation of the yen this week,” said Yuji Saito, director of the foreign-exchange department in Tokyo at Credit Agricole CIB. “This is a factor for the yen to be bought.”
Tax breaks initiated by Japan last year to foster the nation’s economic recovery may lead to “larger than usual” repatriations, Geoffrey Yu, a London-based strategist at UBS AG, the world’s second-largest currency trader, wrote in a report yesterday. UBS also estimated transfers of overseas earnings for 2009 would exceed $16 billion.
The yen also rose on speculation foreign investors will buy the currency ahead of the share listing of Dai-ichi Mutual Life Insurance Co., Japan’s second-largest life insurer.
‘Speculative’ Buying
“The market may see a large amount of yen buying tied to the initial public offering,” said Takashi Kudo, general manager of market information in Tokyo at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. “Demand for speculative yen buying may rise.”
Dai-ichi tentatively priced the shares at 125,000 yen to 155,000 yen each for listing on April 1, according to a filing yesterday. It will sell 4.6 million shares in Japan and 2.5 million shares overseas, the filing said.
The pound slid after the Royal Institution of Chartered Surveyors reported the number of agents and surveyors saying U.K. house prices rose exceeded those reporting declines by 17 percentage points in February. Economists had predicted 30 points in a Bloomberg survey.
Financial-strength ratings of U.K. banks and lenders that haven’t improved their funding position may be cut as government support for the industry is withdrawn, according to a report by Moody’s today.
‘Sterling-Negative’
“The RICS housing data weighed on sterling,” said Paul Robinson, a currency strategist at Barclays Plc in London. “The Moody’s report about U.K. banks was also deemed to be sterling- negative.”
China’s currency faces increasing expectations that it will appreciate because of a widening interest-rate differential, the State Administration of Foreign Exchange said in a statement in Beijing today. That is attracting money into the country, according to the administration.
The yuan was little changed today at 6.8263 per dollar. Twelve-month non-deliverable forwards in the currency traded at 6.6415, according to Bloomberg data. The contracts touched 6.6260 yesterday, the strongest since Feb. 1.
To contact the reporters on this story: Ben Levisohn in New York at blevisohn@bloomberg.net; Matthew Brown in London at mbrown42@bloomberg.net
