Yen declines on fears of lower US spending

ASIAN CURRENCIES ROUND-UP

The yen fell against all but one of 16 of the most-active currencies as European stocks rose and Asia's benchmark equity index advanced to a three-week high, prompting investors to purchase higher-yielding assets funded in Japan.

The yen dropped the most versus the Norwegian krone, a favourite for so-called carry trades, before a US government report on factory orders that may show business spending is holding up in the world's biggest economy.

The yen declined to 158.38 per euro as of 9:27 a.m. in London, from 157.67 late in New York on February 1. It was at 106.91 versus the dollar from 106.49.

The yen dropped 0.8 per cent to 19.7427 versus the krone and declined 0.9 per cent to 211.09 to the pound. It fell to a three-week low against the Australian dollar, also known as the aussie, weakening 0.7 per cent to 96.92.

The Chinese yuan advanced on signs the nation is allowing its currency to appreciate at a faster pace to help slow inflation. The currency extended eight weeks of gains after former central bank Deputy Governor Wu Xiaoling said on February 2 the authorities will tighten credit growth further and make the yuan more flexible.

China is seeking to keep the nation's worst snowstorms in five decades from pushing up consumer prices as inflation is already above the central bank's annual target.

The yuan traded at 7.1837 per dollar as of 1:35 p.m. in Shanghai, from 7.1890 on February 1, according to China Foreign Exchange Trade System. The currency has gained 1.7 per cent this year, after rising about 7 per cent in 2007.

China may be allowing the currency to gain to cool inflation that is double the central bank's 3 per cent target rather than increasing interest rates, which may attract money to an economy already flush with cash from a record trade surplus.

Other currencies
South Korea's won advanced on speculation exporters such as Hyundai Heavy Industries were buying the currency to settle accounts before this week's Lunar New Year holidays.

The won traded near the highest in more than two weeks against the dollar as global fund managers bought more Korean stocks than they sold for a second day. The MSCI Asia-Pacific Index of regional shares rose 2 per cent, the most since January 25. Taiwan's dollar strengthened to the highest since June 2006.

The Korean currency advanced 0.2 per cent to 942.80 against the dollar as of the 3 p.m. close in Seoul, compared with 944.25 on February 1, according to Seoul Money Brokerage Services. The Taiwan dollar rose 0.3 per cent to NT$32.07 from NT$32.178 at the end of last week, according to Taipei Forex Inc.

Markets in China, South Korea and Taiwan are closed on February 6-8 for the Lunar New Year holiday. Singapore, Malaysia and Hong Kong are closed February 7-8. Indonesia shuts on February 7.