By Yoshiaki Nohara and Ron Harui March 11 (Bloomberg) -- The yen and dollar rose versus their major counterparts after Chinese reports on inflation, factories and loans fueled concern the government will act to damp growth, boosting demand for the lowest-yielding currencies. Japan’s currency strengthened from a two-week low versus the euro after Chinese inflation reached a 16-month high and on speculation exporters brought funds home before the fiscal year ends this month. Australia’s dollar fell from a seven-week high after the nation’s employers added fewer jobs than economists forecast, damping expectations the central bank will raise interest rates next month. “Strong inflation data should enhance pressure for tightening in China,” said Minoru Shioiri, chief manager of foreign-exchange trading in Tokyo at Mitsubishi UFJ Securities Co., unit of Japan’s largest publicly traded bank by market value. “The bias is for the yen to rise.” The yen climbed to 123.24 per euro as of 1:29 p.m. in Tokyo from 123.62 in New York yesterday, when it fell to 124.00, the weakest since Feb. 23. Japan’s currency advanced to 90.32 per dollar from 90.52. The greenback traded at $1.3642 per euro from $1.3657, and was at $1.4963 per pound from $1.4978. The Australian dollar dropped 0.3 percent to 91.30 U.S. cents after advancing to 91.93 yesterday, the strongest since Jan. 20. The so-called Aussie declined 0.5 percent to 82.46 yen. Chinese Data China’s consumer prices rose 2.7 percent from a year earlier in February, after gaining 1.5 percent the prior month, the statistics bureau said in Beijing. Industrial output climbed 20.7 percent in the first two months of the year. Banks extended 700 billion yuan ($102.5 billion) of new loans in February, central bank data showed today. Premier Wen Jiabao aims to hold full-year inflation at about 3 percent after banks flooded the financial system with money. Gross domestic product grew 10.7 percent last quarter and central bank Governor Zhou Xiaochuan said March 6 that anti- crisis policies, including the yuan’s peg to the dollar, must end “sooner or later.” The yen snapped four days of losses against the Australian dollar on speculation Japanese companies brought home their overseas earnings. 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 weaker yen boosts the profits of exporters. “Japanese exporters may be repatriating yen, given the March fiscal year-end is approaching,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “There’s talk they may be behind their sales of euro-yen.” Australian Dollar Australia’s dollar fell for the first time in five days against the greenback after the statistics bureau said employers added 400 jobs in February, the least in six months. “The RBA seems to be more on a path of not needing to rush toward tightening,” said Greg Gibbs, a currency strategist at Royal Bank of Scotland Group Plc in Sydney. “A pause in April is entirely within the script.” Benchmark interest rates of 0.1 percent in Japan and as low as zero in the U.S. compare with 4 percent in Australia and 2.50 percent in New Zealand, attracting investors to the South Pacific nations’ assets. The risk in such trades is that currency market moves will erase profits. To contact the reporter on this story: Yoshiaki Nohara in Tokyo at Ynohara1@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.

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