Yen, Dollar Post Weekly Advance as Havens on Stimulus Concern

Feb. 13 (Bloomberg) -- The yen and dollar recorded weekly gains against most of the other major currencies as concern U.S. plans to end the recession and the financial crisis will fall short spurred demand for havens.

Japan’s currency and the dollar advanced more than 3 percent versus the South African rand and Swedish krona this week as a lack of detail in the U.S. Treasury’s financial recovery plan encouraged investors to repatriate funds. Finance ministers and central bankers of the Group of Seven major industrial nations said in a draft statement that “excess volatility and disorderly movements” in exchange rates should be avoided.

“The stimulus package is not what people were hoping for,” said Alan Kabbani, a senior currency trader at Wachovia Corp. in Charlotte, North Carolina. “They need to find a way to fix the banking industries. So far, we haven’t heard that, which means there’s more risk in the market, which is good for the yen and the dollar.”

The yen advanced 0.4 percent to 118.37 versus the euro this week from 118.85 on Feb. 6. It dropped 1.2 percent at 4:24 p.m. in New York, compared with yesterday. The dollar appreciated 0.5 percent to $1.2874 per euro from $1.2940, weakening 0.1 percent today. The dollar was little changed at 91.94 yen this week after increasing 1.1 percent today.

Chile’s peso was one of the biggest gainers against the dollar today among the 177 currencies tracked by Bloomberg after the central bank cut the target lending rate yesterday by 2.5 percentage points to 4.75 percent, the sharpest reduction in at least a decade. The currency advanced as much as 3.4 percent to 573.92, the strongest level since Oct. 3.

Russia’s Ruble

Russia’s ruble posted its biggest weekly rally against the dollar since December 1998 after Bank Rossii raised its interest rate on loans secured with bonds or other collateral through repurchase auctions twice in 10 weeks to force banks and companies to convert foreign currency. The ruble gained 4.4 percent to 34.5938 versus the dollar this week.

G-7 officials will continue to monitor currency markets closely and cooperate as appropriate, finance ministers and central bankers meeting in Rome said in the draft statement.

“The key is that they did not specify any single currency by name, so there’s likely to be only a muted reaction,” said Brian Dolan, chief currency strategist at FOREX.com, a unit of online currency trading firm Gain Capital in Bedminster, New Jersey. “We may see a much weaker yen in the weeks ahead.”

Since late October, when the G-7 expressed concern about the yen’s “excessive gains,” the currency climbed 0.9 percent. It appreciated 23 percent against the dollar in 2008, hurting overseas profits for such exporters as Toyota Motor Corp.

Yen Versus Rand

The yen climbed 3.8 percent to 9.25 versus the South African rand and 3.4 percent to 10.96 against Sweden’s krona this week on speculation Japanese investors are selling higher-yielding assets and repatriating funds as the global recession deepens. Japan’s target lending rate of 0.1 percent compares with 10.5 percent in South Africa and 2 percent in Sweden.

The U.S. House passed today a $787 billion economic stimulus plan designed to help repair the economy through tax cuts for businesses and families and a half-trillion dollars in federal spending. The chamber voted 246-183 for the measure with no Republicans in favor. The Senate plans to approve the package later today and send it to President Barack Obama for signing.

Treasury Secretary Timothy Geithner, speaking on Feb. 11 before the Senate Budget Committee, defended his strategy of taking time to work out the details of a separate plan to shore up the financial industry.

Dollar Versus Rand

The dollar rallied 3.8 percent to 9.9370 South African rand and 3.6 percent to 8.3905 kronor this week as investors sought refuge in the world’s reserve currency.

Coca-Cola Co., the largest soft-drink maker, said this week that the strong dollar reduced fourth-quarter profit, while PepsiCo Inc., the second-largest, said it raised prices to counter higher commodity costs and a gain in the greenback.

The euro fell this week versus the dollar after the European Union’s statistics office said today gross domestic product in the 16-nation region decreased 1.5 percent, the most since euro- area GDP records began in 1995.

The pound was poised for its first weekly loss against the dollar and euro since Jan. 23 after Bank of England Governor Mervyn King said this week that the economy is in a “deep recession” that may spur Bank of England policy makers to lower the 1 percent target lending rate further.

Sterling dropped 2.3 percent to 89.60 pence per euro and 2.7 percent to $1.4394 this week after respective gains of 0.6 percent and 0.9 percent today.