Yen drops against 15 currencies

ASIAN CURRENCIES ROUND-UP

The yen fell against 15 of the world's 16 most actively traded currencies as Japanese investors sent more money overseas in search of higher returns.

Financial companies in Japan are trying to sell 200 billion yen ($1.8 billion) of mutual funds today and focused on the foreign markets on January 9, according to data compiled by Bloomberg. The currency dropped the most since December 21 as traders bet its advance last week, the biggest in two months, would prompt the investors to switch to higher yielding assets.

The yen dropped 0.8 per cent to 109.46 a dollar at 10:04 am in London, from 108.6 in New York on January 4. It fell 0.3 per cent to 160.60 a euro from 160.09 and declined to 108.96 against Canada's dollar from 108.29. The yen may trade between 108 and 110.67 yen to the dollar this week, Stretch predicted.

The dollar rose 0.9 per cent against the Swiss franc to 1.1176 as the Sonntag newspaper reported that Credit Suisse Group may announce another 2.5 billion francs ($2.3 billion) in writedowns in the fourth quarter.

Japan's currency fell the most versus the Australian dollar, dropping 1 per cent to 95.63 yen. It slipped 0.9 per cent to 11.639 Korean won, from 11.531 at the end of last week. Yuan rises to the highest since peg as China seeks to cool economy

China's yuan rose to the highest since its peg to the dollar ended in 2005 on speculation the central bank will allow faster gains to cool the economy. The yuan was the best performing currency last month, among the 10 most traded currencies in Asia outside Japan and the Philippines as China seeks to temper inflation at the fastest in 11 years and reduce a record trade surplus. The currency's gains reflect "economic data,'' People's Bank of China Governor Zhou Xiaochuan said in Basel, Switzerland.

"The domestic case for faster currency appreciation has been in place for quite some time,'' said Richard Yetsenga, a currency strategist at HSBC Holdings in Hong Kong. There's been "more policy acceptance of the need for a more balanced currency market.''

The yuan gained 0.05 per cent to 7.2690 a dollar as of the 5:30 pm close in Shanghai, according to the China Foreign Exchange Trade System. The currency earlier touched 7.2630, the strongest since the peg was abandoned. The yuan will rise to 6.86 by the end of the year, said Yetsenga.

The surplus, rising prices and Chinese institutions selling currency reserves "may be major factors towards the formulation of the exchange rate,'' Zhou said in Switzerland, where he's meeting Group of 10 central bankers. A stronger yuan will lower the import costs and may cut the demand for its exports by making goods shipped overseas more expensive.

The yuan will rise to 6.88 a dollar by the end of 2008, according to the median estimate of 29 analysts surveyed by Bloomberg News. Forward contracts show traders are betting on an 8.8 per cent advance to 6.6825 in the next 12 months.

Won declines on record oil prices
The South Korean won reached a two-week low as record oil prices and speculation that the demand for Asian exports will cool the world's biggest economy led investors to dump shares. A report last week showing that US companies hired the least workers in four years prompted funds abroad to sell more Korean equities than they bought for a third day, extending the currency's loss to 2.3 per cent over the past month.

"With local stocks kicking off sharply weaker, currency players are positioning themselves for the won's weakness,'' said Ko Yun Jin, a currency dealer with Kookmin Bank in Seoul.

The Korean currency fell 0.2 per cent to 940.40 against the dollar as of 3 pm close in Seoul, according to Seoul Money Brokerage Services. It fell as low as 943.50 last reached on December 21.

Goldman Sachs Group, the world's biggest securities company, lowered its Korean won forecasts last week, saying the central bank will cut interest rates to boost the economy.

The won will drop to 945 in three months and 950 in six months, compared with previous forecasts of 920 and 915, respectively, economists Goohoon Kwon and Eva Yi said in a research report. They see the won rising to 930 in a year.

The Taiwan dollar also weakened as the benchmark index of equities had its lowest close since December 20. Fund managers based outside Taiwan offloaded more of Taiwan's stocks than they bought for four days, the longest stretch of net-sales since December 18, according to stock exchange data.