Yen Is Near 1-Week Low as Global Stimulus Reduces Haven Demand

Dec. 9 (Bloomberg) -- The yen traded near a one-week low against the euro on speculation official efforts to tackle the global economic crisis will boost Asian stocks and reduce the Japanese currency’s appeal as a safe haven.

The yen was near a one-week low against the New Zealand dollar after Governor-General Anand Satyanand said the nation will cut taxes and boost construction to spur growth. Congress and the administration of President George W. Bush negotiated a $15 billion rescue of U.S. automakers. The euro fell against the dollar before German economic sentiment data that may show pessimists outnumbered optimists for the 17th month.

“Stock markets are settling down and that may put some pressure on the yen to weaken,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “Various stimulus measures and the prospects for a bailout for U.S. carmakers are helping sentiment.”

The yen traded at 120.06 per euro as of 8:11 a.m. in Tokyo from 120.26 late yesterday in New York, when it fell to 120.96, the lowest since Dec. 1. Against the dollar, it was little changed at 92.95. The euro declined to $1.2920 from $1.2963.

Japan’s currency traded at 50.77 per New Zealand dollar, little changed from late yesterday in New York, when in declined to a one-week low of 51.21. In carry trades investors obtain funds in a country with low borrowing costs and buy assets where returns are higher. Japan’s 0.3 percent target rate compares with 2.5 percent in Europe and 5 percent in New Zealand.

Stocks Gain

The Standard & Poor’s 500 Index jumped 3.8 percent yesterday. Japan’s yen traded in the opposite direction of the index more than 90 percent of the time in the past month, data compiled by Bloomberg show.

Implied volatility on one-month dollar-yen options fell for a fifth straight day, dropping to 20.46 percent, indicating investors see less price fluctuation in the currency pair next month. The index jumped to 41.79 percent on Oct. 24, the highest level since 1995, when Bloomberg started to compile the data. A drop in volatility reduces the risk of the carry trade by making profits easier to predict.

New Zealand will cut income taxes by NZ$4.4 billion ($2.4 billion), increase road and school construction to help the economy out of recession, the government said today.

In an NBC television interview on Dec. 7, Obama reiterated his commitment to the biggest investments in the nation’s infrastructure since the 1950s. The U.S. president-elect takes office Jan. 20. The European Union proposed a 200 billion euro ($258 billion) stimulus package last month.

U.S. Automakers

Congressional lawmakers met yesterday and over the weekend to work out a rescue package for the big U.S. automakers, General Motors Corp., Chrysler LLC and Ford Motor Co. The rescue plan, which will offer automakers $15 billion in loans intended to help them survive at least until March, is likely to be passed and signed into law this week, House Financial Services Committee Chairman Barney Frank said yesterday.

Investor confidence in German’s economy, Europe’s largest, worsened in December, the ZEW Center for European Economic Research’s index of investor and analyst expectations will probably show today. The index fell to minus 57 from minus 53.5 in the previous month, according the median estimate of 38 economists in a Bloomberg News survey.