Yen rises as investors cut carry trades

ASIAN CURRENCIES ROUND-UP

The yen rose against 15 of the 16 most-active currencies as a decline in Asian stocks spurred investors to cut overseas holdings of higher-yielding assets funded by loans in Japan.

The Japanese currency gained the most versus the British pound and Australian dollar as investors cut so-called carry trades on concern the global economy will cool.

The pound also fell against the euro before the Bank of England meets on interest rates today, with a Credit Suisse index showing 61 per cent odds of a cut in the benchmark from 5.5 per cent.

The yen climbed to 109.81 against the US currency as of 8:13 a.m. in London from 110.04 yesterday in New York. It traded at 161.03 per euro from 161.31.

The MSCI Asia Pacific Index of regional shares fell 1.2 per cent, snapping two days of gains, and the Nikkei 225 Stock Average dropped 1.5 per cent. Japan's currency may rise to 90 a dollar by March 31, Hayashi forecast.

The yuan fell from the strongest since a dollar peg was scrapped in 2005 on speculation China's central bank is seeking to promote two-way movement in the currency to deter traders betting on further gains. Bonds fell.

The yuan fell 0.14 percent to 7.2719 versus the dollar as of the 5:30 p.m. close in Shanghai, compared with 7.2620 yesterday, according to data compiled by Bloomberg. Government bonds fell after the central bank sold three-year notes at a record high yield.

Other currencies
The South Korean won held near its highest in a week against the dollar as central bank policy makers stressed inflation risks after leaving interest rates unchanged.

The Bank of Korea kept borrowing costs at a six-year high of 5 per cent today at its monthly meeting, as expected by economists surveyed by Bloomberg News. South Korea's economic expansion will stoke inflation, policy makers said in a statement today, fueling speculation they won't cut rates anytime soon. The won pared earlier gains after local stocks dropped.

The currency closed little changed at 937.60 per dollar as of the 3 p.m. close in Seoul, from yesterday's close of 937.40, according to Seoul Money Brokerage Services Ltd.

Governor Lee Seong Tae and his board kept the overnight call target rate unchanged for a fifth straight month, after inflation accelerated to a three-year high in December and crude oil climbed to a record $100 a barrel last week. Lee raised the benchmark in July and August 2007, the nation's first ever back-to-back increase, to cool inflation and lending demand.

Amongst Asia's losers today, the Singapore dollar dropped 0.1 per cent to S$1.4320. The Philippine peso fell for the first time in eight days as a chart traders use to predict price movements signaled the recent rally was excessive.