Thursday, February 25, 2010

Yen Falls Against Higher-Yielding Currencies as Stocks Rebound

Feb. 25 (Bloomberg) -- The yen weakened as a rebound in stocks and prospects that economic stimulus measures will stay in place curbed demand for Japan’s currency as a refuge.

The yen fell against all of its 16 major counterparts as local shares followed a equities rally in the U.S. The Australian and New Zealand dollars rose for a third day this week as Federal Reserve Chairman Ben S. Bernanke said the U.S. needs low interest rates to preserve a “nascent” recovery, safeguarding the South Pacific nations’ yield advantage.

“If you get stocks up and risk is a bit better, it seems to remove a little bit of safe-haven demand,” said Tony Morriss, a senior markets strategist in Sydney at Australia & New Zealand Banking Group Ltd. “It’s quite a nuanced message from the Fed at the moment. They are ready to start unwinding extraordinary measures, but clearly committed to keeping the Fed fund rate low.”

The yen declined to 90.25 to the dollar as of 9:25 a.m. in Tokyo from 90.15 in New York yesterday. Japan’s currency traded at 122.09 per euro from 122.03. New Zealand’s dollar climbed 0.2 percent against the U.S. currency, while Australia’s strengthened 0.1 percent.

The U.S. currency traded at $1.3533 versus the euro from $1.3538 yesterday. The dollar has risen 2.5 percent versus the euro this month, heading for a third monthly gain, its longest stretch since November 2008.

The Nikkei 225 Stock Average advanced 0.4 percent after the Standard & Poor’s 500 Index rose 1 percent.

Low Rates Needed

Bernanke said low interest rates are needed to encourage demand by consumers and businesses once federal stimulus expires.

“A sustained recovery will depend on continued growth in private-sector final demand for goods and services,” Bernanke told the House Financial Services Committee yesterday in Washington at the start of his two days of semi-annual testimony before Congress. “Private final demand does seem to be growing at a moderate pace.”

Interest-rate futures on the Chicago Board of Trade yesterday showed a 51.5 percent chance U.S. policy makers would raise the target lending rate by at least a quarter-percentage point to 0.5 percent by November. That was down from 57.5 percent the day before.