Yen rises against $ on high Fed cut bets

ASIAN CURRENCIES ROUND-UP

The dollar fell for a fourth day against the yen as speculation US retailers failed to boost sales last month increased chances the Federal Reserve will cut interest rates by the most in more than two decades.

The dollar declined to its lowest in almost two months as traders raised bets on the Fed lowering its benchmark rate by three-quarters of a percentage point on January 30. The Fed hasn't reduced it by that much since 1984.

The yen rose on speculation slowing global growth and more evidence of losses at financial-services companies will cause investors to pare purchases of higher-yielding assets funded with the Japanese currency.

The dollar declined to 107.54 yen at 10:32 a.m. in London, after falling to the lowest since November 28, from 108.16 yesterday in New York. The US currency has lost 2.4 per cent against the Japanese currency in the past four trading days. It may decline to 102 yen "relatively rapidly,'' said Derrick, without providing a specific timeframe.

The yen rose versus all 16 major currencies, gaining the most against the Brazilian real. The most volatile exchange rates this decade are prompting traders to buy yen to repay loans funded in the currency used to purchase higher-yielding assets.

The yuan rose to the highest since a dollar link ended more than two years ago as US Treasury Undersecretary David McCormick called on China for faster currency appreciation to help offset trade imbalances.

A 14 per cent gain in the yuan since July 2005 is "some progress", McCormick said yesterday in an interview after a speech at the University of California, San Diego.

He urged China to increase flexibility in the yuan by broadening the basket of currencies it uses to guide the exchange rate. The nation allowed the currency to rise more quickly last year as it strives to slow economic growth and inflation.

The yuan rose 0.13 per cent to 7.2421 against the dollar as of the 5:30 p.m. close in Shanghai from 7.2516 yesterday, according to data compiled by Bloomberg.

Other currencies
Taiwan's dollar rose as foreign investors increased purchases of the island's stocks after the opposition Kuomintang party, which favors closer ties with China, won parliamentary elections.

The currency closed at its highest since July 2006 as overseas funds bought more equities than they sold for a second day, including yesterday's biggest net purchase since September 19. The benchmark Taiex index of shares rose 3.1 per cent.

Taiwan's dollar rose 0.3 per cent to NT$32.26 against the US currency at the 4 p.m. close of onshore trading, gaining for a third day, according to Taipei Forex Inc. Trading volume was the largest since at least 1989, according to Taipei Forex data available on Bloomberg.

The South Korean won advanced for a third day against the dollar as the next government outlined its proposals to boost economic growth.