BLBG: Yen Climbs to 4-Week High Against Euro on Signs Recovery Waning
By Yasuhiko Seki and Ron Harui
Jan. 19 (Bloomberg) -- The yen strengthened to a four-week high against the euro and gained versus the dollar as speculation the global recovery is slowing spurred demand for the relative safety of Japan’s currency.
The yen rose versus 15 of its 16 major counterparts before a German report that economists said will show investor sentiment fell for a fourth month and as Asian stocks fell. The pound climbed to a six-week high against the dollar after people familiar said Kraft Foods Inc. of the U.S. is nearing an agreement to buy the U.K.’s Cadbury Plc. Australia’s dollar dropped after China, the nation’s largest trading partner, guided bill yields higher to curb loan growth.
“Some worries over the strength of the worldwide rebound and the fall in stocks are causing risk aversion,” said Nobuaki Kubo, vice president of foreign exchange in Tokyo at BBH Investment Services Inc., a unit of New York-based Brown Brothers Harriman & Co. “The yen is being bought.”
Japan’s currency advanced to 130.27 per euro as of 6:42 a.m. in London from 130.58 yesterday in New York, after climbing to 129.99, the strongest level since Dec. 22. The yen rose to 90.45 versus the dollar from 90.78, after touching 90.35, the highest since Dec. 21.
The pound gained to $1.6411 from $1.6343, after reaching $1.6421, the most since Dec. 8. The U.K. currency appreciated to 87.67 pence euro from 88.03 pence.
German Sentiment
The yen strengthened for a fourth day against the euro before the ZEW Center for European Economic Research reports today its index of investor sentiment in Germany, the region’s biggest economy.
The ZEW Center for European Economic Research’s index of investor and analyst expectations, which aims to predict developments six months ahead, slipped to 50 this month from 50.4 in December, according to the survey.
The dollar fell against the yen before U.S. reports this week forecast to show building permits increased at a slower pace and manufacturing in the Philadelphia region fell.
The Commerce Department will say tomorrow building permits rose at a 580,000 pace in December, compared with 589,000 in November, according to a Bloomberg survey. The Federal Reserve Bank of Philadelphia’s general economic index, due Jan. 21, declined to 19.4 this month from 20.4 in December, a separate survey showed.
The Nikkei 225 Stock Average declined for a second day , losing, 0.8 percent, and the MSCI Asia Pacific Index of shares dropped 0.6 percent.
Pound Gains
The pound rose against all 16 most-active currencies on optimism capital will flow into the U.K. to finance mergers and acquisitions.
Kraft is in talks to buy Cadbury for as much as 12 billion pounds ($19.7 billion), according to three people with knowledge of the matter. Kraft Chief Executive Officer Irene Rosenfeld increased the original bid after Cadbury rejected it as “derisory” and Hershey Co. prepared to mount a rival offer.
“There’s talk that Kraft will take over Cadbury,” said Takashi Kudo, general manager of market information service at NTT SmartTrade Inc., a unit of Nippon Telegraph & Telephone Corp. “This M&A activity is pushing the pound higher.”
Australia’s dollar fell from near a two-month high against the greenback after the People’s Bank of China sold one-year bills at a rate of 1.9264 percent in open-market operations, according to Bloomberg data. The yield rose eight basis points after five months during which it was held unchanged.
“We’re now moving into a period where we’re getting signs of China withdrawing easy monetary policy rather than tightening,” said Robert Rennie, chief currency strategist at Westpac Banking Corp. in Sydney. “Softer equity price action may see Aussie back down towards 80 yen,” which would be an opportunity to buy the currency, he said.
Australia’s dollar fell to 92.46 U.S. cents from 92.63 cents. It rose to 93.28 on Jan. 14, the strongest since Nov. 18. The currency dropped 0.5 percent to 83.68 yen.
To contact the reporters on this story: Yasuhiko Seki in Tokyo at Yseki5@bloomberg.net; Ron Harui in Singapore at rharui@bloomberg.net.
