Monday, March 1, 2010

Yen May Fall as Greece Bail-Out Speculation Boosts Yield Demand

March 1 (Bloomberg) -- The yen may decline for a second day against the euro on speculation European Union governments will rescue debt-laden Greece, boosting demand for higher-yielding currencies.

The 16-nation euro may advance after French Finance Minister Christine Lagarde said European governments are studying ways to assist Greece. The dollar may fall against the Australian and New Zealand dollars before a report today forecast to show U.S. manufacturing expanded at a slower pace.

“Rescue aid, if realized, will reduce the drag on the euro,” said Akio Yoshino, chief economist in Tokyo at Societe Generale Asset Management (Japan) Inc. “This will then weaken demand for safe-haven currencies such as the yen.”

The yen was at 121.32 per euro as of 8:24 a.m. in Tokyo from 121.26 in New York on Feb. 26. The euro was at $1.3630 from $1.3631. The dollar changed hands at 89.02 yen from 88.97 yen last week. Australia’s currency climbed to 89.90 U.S. cents from 89.54 cents. New Zealand’s dollar fetched 70.05 U.S. cents from 69.82.

“I have no doubt Greece will be able to refinance through means we are exploring,” Lagarde told Europe 1 Radio yesterday. Proposals to aid Greece include a combination of public and private options, and Greece will not leave the euro system, she said.

German lender KfW Group is preparing measures that are part of a European plan to grant Greece as much as 25 billion euros ($34 billion) in aid should the need arise, four of the nation’s lawmakers, who spoke on the condition of anonymity because the information is confidential, said last week.

ISM Survey

Greece needs to raise 53 billion euros this year and faces more than 20 billion euros of bond redemptions by the end of May, according to data compiled by Bloomberg. Greece has the cash it needs until the middle of March, Prime Minister George Papandreou told the British Broadcasting Corp. on Feb. 21.

The U.S. dollar may fall for a second day against Australia’s and New Zealand’s before a report forecast to show U.S. manufacturers expanded at a slower pace in February.

The Institute for Supply Management’s factory index fell to 58.0 last month from 58.4 in January, according to a Bloomberg News survey of economists before the release of the survey today.

Payrolls probably fell by 50,000 after declining 20,000 in January, according to the median forecast of 62 economists surveyed by Bloomberg News before the Labor Department’s March 5 report. The unemployment rate may have increased to 9.8 percent from 9.7 percent.

Futures traders increased bets that the Australian dollar will gain against the greenback, 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 an advance in the Australian dollar compared with those on a drop -- so-called net longs -- was 38,992 on Feb. 23, compared with net longs of 27,003 a week earlier.