Monday, March 8, 2010

Yen Falls Versus Euro as Recovery Signs Increase Yield Demand

March 8 (Bloomberg) -- The yen fell to a two-week low against the euro as signs the global economic recovery remains on track boosted demand for higher-yielding assets.

The yen weakened against 15 of its 16 major counterparts after Japanese exports grew in January for a second month and before data today that economists said will show German industrial output rose. Australia’s dollar touched the strongest in six weeks against the U.S. currency as risk sentiment improved after French President Nicolas Sarkozy said yesterday the euro region is ready to rescue Greece.

“We are seeing a classic reversal of the yen, having been the preeminent safe-haven currency in recent weeks,” said Ray Attrill, global research director at Forecast Ltd. in Sydney. “The U.S. dollar is generally being sold off because of an improvement in risk appetite. The yen is being sold off even more.”

Japan’s currency fell to 123.60 per euro as of 9:29 a.m. in Tokyo from 123.00 in New York on March 5. It earlier touched 123.69, the weakest since Feb. 23. The yen dropped to 90.48 per dollar from 90.28 after reaching 90.68, the lowest since Feb. 23. The euro rose to $1.3665 from $1.3626. Australia’s currency was at 90.94 U.S. cents from 90.77 cents after climbing to 91.06, the most since Jan. 21.

The yen dropped against the dollar for a third day as Japan’s current-account surplus was 899.8 billion yen ($9.9 billion) from a year earlier, when it was in deficit, the Ministry of Finance said in Tokyo today. Exports surged 41 percent on an annual basis.

‘We Are Ready’

German industrial production rose 1 percent in January after falling 2.6 percent the previous month, according to a Bloomberg News survey before the Economy Ministry report today.

The euro advanced against the dollar for a second day after Sarkozy voiced his support for Greece.

“I want to be very clear: if it were necessary, the states of the euro zone would fulfill their commitments,” he said in Paris after a meeting with Greek Prime Minister George Papandreou. “There can be no doubt in this regard.”

While Greece doesn’t need assistance right now, “we have measures, we are ready, we are determined,” he said.

Sarkozy’s comments are among the strongest by a European Union leader to signal the bloc would bail out Greece if necessary as officials strive to warn investors against making further bets against the euro and Greek bonds. Papandreou’s government last week passed a further round of austerity measures and sold 5 billion euros ($6.8 billion) in government debt.

Futures traders decreased bets the euro will decline against the dollar, figures from the Washington-based Commodity Futures Trading Commission show.

The difference in the number of wagers by hedge funds and other large speculators on a decline in the euro compared with those on a gain -- so-called net shorts -- was 66,770 on March 2, compared with net shorts of 71,623 a week earlier.