Yen Rises to 3-Week High Versus Dollar, Euro on CIT, Stock Drop

Nov. 2 (Bloomberg) -- The yen rose to the most in almost three weeks against the dollar and the euro after New York-based CIT Group Inc. filed for bankruptcy, boosting demand for Japan’s currency as a shelter from financial turmoil.

CIT listed $71 billion in assets and $65 billion in debt, according to the bank’s filing. The Australian and New Zealand dollars fell against the greenback on concerns Asian stocks will extend last week’s rout in European and U.S. equities.

“There are renewed concerns over the health of U.S. financial institutions and stock losses” following the bankruptcy of the CIT group, said Toshiya Yamauchi, manager of the foreign-exchange margin-trading department at Ueda Harlow Ltd. in Tokyo. “The yen and the dollar will see buying as risk- aversion plays.”

The yen rose to 89.23 against the dollar as of 7:44 a.m. in Tokyo from 90.09 yen in New York on Oct. 30, after earlier touching 89.21 yen, the most since Oct. 14. It reached 131.03 against the euro, the strongest since Oct. 9, before trading at 131.77, from 132.61 in New York. Japan’s currency was at 79.49 against the Australian dollar from 81.05 on Oct. 30.

Australia’s currency fell to 89.13 U.S. cents from 89.97 cents in New York on Oct. 30. New Zealand’s dollar declined to 70.83 U.S. cents, near the least since Oct. 2, from 71.81 in New York last week.

U.S. stocks fell the most since May last week, with the Standard & Poor’s 500 index dropping 4 percent.

CIT

U.S. taxpayers probably won’t recoup much, if any, of the $2.3 billion in government funds that went to CIT Group, Treasury Department spokesman Andrew Williams said in an e- mailed statement after the 101-year-old commercial lender filed for bankruptcy protection.

“The U.S. financial system is far from a perfect health,” said Mitsuru Saito, chief economist in Tokyo at Tokai Tokyo Securities Co. in Tokyo.

Employers in the U.S. cut fewer jobs this month than in September while the unemployment rate rose to 9.9 percent in October, according to the median forecast in a survey of economists. The Labor Department’s report is due Nov. 6.

Nobel Prize-winning economist Joseph E. Stiglitz said the U.S. recession is “nowhere near” an end and the economy’s third-quarter growth rate of 3.5 percent, the first expansion in more than a year, won’t carry into 2010.

“When we look at if workers can get jobs, if they can work full time, if businesses are able to sell goods they produce, in those terms, we are nowhere near the end of recession” in the U.S., Stiglitz, 66, the former chief economist at the World Bank said on Oct. 31. The U.S. job market is still “in very bad shape.”

Futures Positions

Futures traders decreased their bets that the euro will gain against the U.S. dollar, figures from the Washington-based Commodity Futures Trading Commission showed.

The difference in the number of wagers by hedge funds and other large speculators on an advance in the euro compared with those on a drop -- so-called net longs -- was 32,869 on Oct. 27, compared with net longs of 36,033 a week earlier.

Futures are agreements to buy or sell assets at a set price and date. The figures reflect holdings in currency-futures contracts at the Chicago Mercantile Exchange as of Tuesday.