Yen falls against euro as stocks rise

ASIAN CURRENCIES ROUND-UP

The yen fell against the euro as stocks around the world rose, restoring appetite for higher- yielding assets purchased with money borrowed in Japan.

The Japanese currency declined the most against the South African rand, a favourite of the so-called carry trade, and extended its losses against the euro as European and Asian stocks advanced. The Australian dollar climbed after a government report showed the unemployment rate fell to the lowest since 1974.

"Risk aversion is declining and the consequence of that has been the yen going lower,'' said Steven Barrow, chief currency strategist in London at Bear Stearns, the fifth-largest US securities firm. "There's demand for higher-yielding assets.''

The yen declined for a third day against the euro, to 158.32 by 9:51 am in London, from 157.87 yesterday in New York. Japan's currency was unchanged at 108.32 a dollar. It may recover and trade at 107 in one month, Barrow forecast. The euro advanced to $1.4616 from $1.4573.

The main stock market indexes in Germany and France, the biggest of the 15 economies that share the euro, gained more than 1 per cent. US stock-index futures also rose, with the S&P 500 futures contract adding 0.5 per cent. Earlier, Japan's Nikkei 225 Stock Average jumped more than 4 per cent after Japanese economy expanded twice as fast as economists expected in the fourth quarter, reducing the odds of a cut in borrowing costs.

The Australian dollar rose to 90.35 US cents, from 89.78 cents before the jobs report was released and 89.64 cents yesterday. The currency, known as the Aussie, climbed against all but one of its 16 most-traded counterparts on speculation higher borrowing costs will spur investors to buy Australian assets.

Yuan rises after biggest drop in a month; bonds gain as banks buy
The yuan rebounded from the biggest decline in a month against the dollar, fueling speculation that the Chinese central bank is increasingly considering the performance of the yen and the euro when managing its currency.

The currency climbed, after dropping as much as 0.6 per cent yesterday, as the Securities Journal cited unnamed experts saying it will appreciate against major currencies this year. Since ending a dollar peg in 2005, the yuan has risen 15 per cent against the US currency as the central bank has allowed it to float with reference to the exchange-rates of its leading trading partners.

"There's a new strategy in play of faster appreciation and increasing use of the effective exchange rate as a target, rather than just the dollar,'' said Stephen Green, head of research with Standard Chartered in Shanghai. "This does not mean appreciation every day. We are looking for more volatility.''

The yuan rose 0.13 per cent to 7.1904 a dollar as of the 5:30 pm close in Shanghai, from 7.2000 yesterday, according to China Foreign Exchange Trade System. It has gained 1.5 per cent this year against the dollar, after rising about 7 per cent last year and 3.4 per cent in 2006.

The yuan gained 2.2 per cent against the euro this year, after falling 4.4 per cent last year. The Westpac Nominal Effective Exchange Rate, a trade-weighted index for the yuan, climbed 0.8 per cent this year, after a 3.4 per cent gain last year.

The central bank will focus on a trade-weighted "effective'' exchange rate of the yuan instead of targeting only the rate versus the US dollar, the state-owned Chinese language Securities Journal said.

Won gains on stock rise; Singapore dollar falls
Asian currencies such as South Korea's won rose on speculation a rebound in the region's stock markets will fuel demand for higher-yielding assets.

The Thai baht and Malaysia's ringgit strengthened this year to the highest levels since the Asian financial crisis in 1997. Cuts in US interest rates and the prospect of more to come have helped revive investor appetite for Asian assets.

Six of the 10 most actively traded Asian currencies outside of Japan gained in 2008. Korea's won snapped a three-day decline today as the nation's stock index rose 4 per cent and Indonesia's rupiah climbed as the nation's credit rating was lifted to the highest since 1997 by Fitch Ratings.

"The won appears tilted toward further strength,'' said Sam Hong, a currency dealer with Shinhan Bank in Seoul. "The local currency market is taking a cue from the favorable stock market.''

The Korean currency climbed 0.1 per cent to 945.25 against the dollar as of the 3 pm close in Seoul, compared with 945.80 yesterday, according to Seoul Money Brokerage Services. The MSCI Asia Pacific Index rose 3.7 per cent, the most in almost three weeks.

Malaysia inflows
Malaysia's ringgit and the nation's benchmark stock index advanced for a third day after US retail sales unexpectedly increased last month, easing concern that the world's largest economy is entering a recession. The cuts in US interest rates have also boosted Malaysia's yield advantage, attracting funds from abroad.

"The ringgit is still largely driven by equity inflows and there's also added support from the positive interest-rate differential,'' said Nor Alfian Din, head of the Asian currency unit in Kuala Lumpur at Malayan Banking Bhd.

The currency traded at 3.2335 a dollar, compared with 3.2390 late yesterday, according to data compiled by Bloomberg.

Malaysia ships about one-fifth of its exports to the US, the country's biggest market. The central bank's overnight rate is 3.5 per cent compared with the Federal Reserve's benchmark of 3 per cent.