Yen, Dollar May Extend Gains as Stock Losses Reduce Risk Demand

Nov. 20 (Bloomberg) -- The yen and the dollar may gain against the euro for a second day as Asian stocks extended the biggest drop in global equities this month, boosting demand for the two currencies as a refuge.

The dollar headed for a weekly gain against 12 of its 16 major counterparts amid speculation traders cut bets the currency will weaken and U.S.-based investors will bring home funds before the holiday season. The Australian and New Zealand dollars headed for their first weekly loss against the U.S. currency this month on prospects a sluggish global recovery will deter policy makers from raising interest rates.

“Given falls we’ve seen in equity prices, I think the risk is that the moves we saw yesterday will probably continue,” said Robert Rennie, head of currency research in Sydney at Westpac Banking Corp. “Once you get to Thanksgiving, generally traders tend to get risk off the table.”

The yen traded at 132.82 per euro as of 9:33 a.m. in Tokyo from 132.79 in New York yesterday, when it climbed to 131.76, the strongest level since Nov. 3. It has gained 0.6 percent against the euro this week. The dollar was at $1.4925 per euro from $1.4925. On the week, it has dropped 0.2 percent. Japan’s currency was at 89.00 per dollar from 88.97, heading for a 0.7 percent weekly gain.

Australia’s Dollar

Australia’s dollar was at 91.88 U.S. cents from 91.86 cents, heading for a 1.4 percent weekly drop. It slid 1.2 percent yesterday as the drop in stocks discouraged carry trades, in which investors buy higher-yielding assets with funds borrowed in nations with relatively low interest rates. Borrowing costs near zero in the U.S. and 0.1 percent in Japan make their currencies popular for investors funding such transactions.

The New Zealand dollar was at 73.07 U.S. cents from 73.11. It has dropped 1.7 percent this week.

The Nikkei 225 Stock Average fell 0.8 percent, heading for a fourth consecutive weekly loss, the longest losing streak since October 2008. The MSCI Asia Pacific Index of regional shares dropped 0.4 percent. The MSCI World Index decreased 1.7 percent yesterday, the biggest decline since Oct. 30.

The Dollar Index, which InterContinental Exchange Inc. uses to track the greenback against the currencies of six major U.S. trading partners including the euro, advanced 0.1 percent to 75.271 yesterday.