Yen moves up as stocks pare gains

ASIAN CURRENCIES ROUND-UP

The yen rose against 12 of the 16 most active currencies as Asian stocks pared gains, encouraging investors to reduce holdings of higher-yielding assets funded with loans in Japan.

The yen rose to 159.89 against the euro at 7:43 am in London from 160.27 late yesterday. It advanced to 87.41 against the New Zealand dollar from 87.71 and to 108.24 a Canadian dollar from 108.47.

The yen was little changed at 108.04 versus the dollar. The euro fell to $1.4801 from $1.4830. Japan's currency may rise to 101 per dollar by the end of June, Suzuki forecast.

The yuan fell for a third day on speculation the central bank wants to slow gains to limit the impact on exporters. Bonds rose.

The currency is set for its longest losing streak this year as the People's Bank of China may seek to deter speculators from betting on one-way moves after the yuan had its biggest advance last week of 2008.

Chinese banks should avoid one-way bets on the yuan to gain as the currency may drop in the future, an official at the nation's foreign-exchange regulator said today.

"The pace of appreciation over recent weeks has accelerated and this has a knock-on effect on the forward market and expectations of future yuan strength,'' said Dwyfor Evans, a currency strategist with State Street Global Markets in Hong Kong.

"If the pace of appreciation attracts further capital into China, then this is counter-productive for the authorities.''

The yuan declined 0.08 per cent to 7.1580 a dollar as of the 5:30 pm close in Shanghai compared with 7.1522 yesterday, according to China Foreign Exchange Trade System. It earlier fell as much as 0.28 per cent.

"As the currency can move both ways, the yuan may depreciate in the future,'' said Deng Xianhong, deputy director of the State Administration of Foreign Exchange in a financial meeting in Shanghai. "It's becoming a concern that forex settlement by banks is increasingly fast as they bet on yuan appreciation.''

Rupiah/peso climb on yield; baht gains
Indonesia's rupiah rose to the highest in more than three months and the Philippine peso gained to an eight-year high as overseas investors sought the nations' higher-yielding assets.

The peso was the best performer among Asia's 10 most active currencies excluding the yen, and the rupiah the second best, as investors were lured by Indonesia's 8 per cent interest rate and the 5 per cent benchmark borrowing cost in the Philippines.

A report yesterday that showed sales of existing homes in the US declined to a nine-year low reinforced speculation the Federal Reserve will cut its benchmark from 3 per cent.

"Some market players are taking positions in the rupiah because of the difference between the Bank Indonesia rate and the US rate.'' said Masahiro Gao, vice president of the treasury unit at PT Bank Mizuho Indonesia.

The rupiah advanced 0.4 per cent to 9,093 a dollar as of 3:21 pm in Jakarta, according to data compiled by Bloomberg. The peso climbed 0.5 per cent to 40.472. It touched 40.40, the highest since February 2000.

Fed funds futures on the Chicago Board of Trade indicate a 90 per cent chance that policy makers will reduce the 3 per cent target rate for overnight lending between banks by a half point at their March 18 meeting and 10 per cent odds of a quarter-point cut.