Yen rises against $ on bets Fed will cut rate by 0.75 pt

ASIAN CURRENCIES ROUND-UP

The dollar fell for a sixth day against the yen and traded near a record low versus the euro as traders increased bets that the Federal Reserve will lower interest rates by 0.75 percentage point this month.

The dollar also held near its lowest ever against a basket of currencies as futures trading showed the odds of a Fed cut to 2.25 per cent rose to 74 per cent, from zero last week.

The Australian dollar declined against every one of its major counterparts as central bank Governor Glenn Stevens signaled interest rates may have peaked after today's increase.

The dollar dropped to 103.21 yen at 9:51 a.m. in London from 103.49 yen in late New York yesterday, when it dropped to 102.62 yen, the lowest since January 28, 2005. The US currency was at $1.5190 per euro, from $1.5204 yesterday, when it slipped to $1.5275, the weakest level since the European currency's 1999 debut. UBS, the world's second-largest currency trader, recommended buying the euro against the dollar. The yen rose for a second day against the euro, gaining 0.4 per cent to 156.77.

The Chinese yuan fell after the central bank set a lower reference rate for trading, spurring speculation the nation is seeking to deter traders from betting on one-way gains. The yuan snapped a four-day advance, creating potential losses for investors speculating the currency will extend its 16.4 percent appreciation since the end of a link to the dollar in July 2005. The People's Bank of China has been allowing the currency to strengthen faster this year to curb inflation that reached an 11-year high.

The yuan traded at 7.1078 per dollar as of 12:08 p.m. in Shanghai, compared with 7.1041 yesterday, according to the China Foreign Exchange Trade System.

The central bank fixed the reference rate for yuan trading at 7.1175 against the dollar, the first time it has set it lower in a week. The yuan is allowed to trade up to 0.5 percent on either side of the daily rate.

The Taiwan dollar and Malaysian ringgit led Asian currencies higher as speculation the Federal Reserve will reduce interest rates to avoid a recession spurred demand for the region's higher-yielding assets.

Seven of the 10 most-traded currencies in Asia outside Japan climbed as traders added to bets that the Fed will cut its 3 per cent benchmark rate on March 18 after a report yesterday showed US manufacturing shrank at the fastest pace in almost five years. Taiwan's benchmark interest rate is 3.375 per cent and Malaysia's is 3.5 per cent.

The Taiwan dollar climbed 0.5 per cent to NT$30.95 against the US currency at the 4 p.m. close of onshore trading, according to Taipei Forex Inc. It reached NT$30.677 on Feb. 29, the strongest since March 2005. Taiwan's currency also traded near its highest in three years as the benchmark Taiex index advanced 2.5 per cent.