Yen Falls a Second Day as Fed Signals U.S. Recession Is Easing

Aug. 13 (Bloomberg) -- The yen fell for a second day against the euro after the Federal Reserve said economic activity is “leveling out,” sapping demand for Japan’s currency as a refuge.

The yen also weakened against all 16 major currencies as Asian stocks extended a U.S. equity rally on signs the global slump is abating, encouraging investors to buy higher-yielding securities. The euro rose for a third day versus the dollar before a government report that economists said will show the contraction in Europe’s economy slowed last quarter.

“The Fed is more comfortable with the U.S. bottoming and at this stage doesn’t see any need for further stimulus,” boosting demand for higher-yielding currencies, said Katie Dean, senior economist in Melbourne at Australia & New Zealand Banking Group Ltd. “The world is becoming more comfortable that the worst is over. The dollar will continue to climb a little bit higher against the yen.”

The yen declined to 136.54 per euro as of 9:13 a.m. in Tokyo from 136.32 in New York yesterday. Japan’s currency traded at 96.07 per dollar from 96.06. The euro advanced to $1.4215 from $1.4188.

The Nikkei 225 Stock Average rose 0.8 percent and the MSCI Asia Pacific Index gained 0.8 percent. The Standard & Poor’s 500 Index added 1.2 percent in New York yesterday following the Fed’s policy statement.

Fed Statement

The Fed has left its target rate for overnight lending between zero and 0.25 percent since December. The central bank said yesterday in Washington it will wind down purchases of Treasuries that had been slated to end in September.

“The committee has decided to gradually slow the pace of these transactions and anticipates that the full amount will be purchased by the end of October,” the Federal Open Market Committee said in a statement after its two-day meeting.

The euro gained for a third day against the dollar before the European Union’s statistics office releases its second- quarter gross domestic product numbers in Luxembourg. GDP in the 16-nation euro area shrank 0.5 percent after a 2.5 percent contraction in the first quarter, according to a Bloomberg News survey of economists.