Yen Falls to Lowest This Year as Stocks Reduce Refuge Demand

March 18 (Bloomberg) -- The yen fell to the lowest level against the euro this year on speculation central banks will unveil measures to combat the global recession, encouraging Japanese investors to buy higher-yielding assets overseas.

Japan’s currency weakened for a seventh day against the New Zealand dollar, the longest losing streak in 11 months, on prospects the Bank of Japan will step up purchases of government bonds, further eroding the allure of the nation’s securities by holding down yields. The euro may rise for a seventh day against the dollar after an unexpected jump in U.S. housing starts triggered a stocks rally, boosting demand for riskier currencies.

“The direction is clearly up for” the euro, said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland Group Plc in Tokyo and a former Bank of Japan currency trader. It may be that a “recovery in risk appetite, given expectations of quantitative easing from central banks, is supporting equity markets.”

The yen fell to 128.73 against the euro at 8:05 a.m. in Tokyo, from 128.35 yesterday, when it slid 0.8 percent. Japan’s currency traded at 52.47 against the New Zealand dollar from 52.31 yesterday and was at 65.44 per Australian dollar from 65.26.

The euro was at $1.3032, following a 0.4 percent gain yesterday. It touched $1.3072 on March 16, the strongest level since Feb. 10. The yen was at 98.78 per dollar.