Yen rises as Moody's prepares credit rating cuts

ASIAN CURRENCIES ROUND-UP

The yen rebounded from a two-week low against the dollar after Moody's Investors Service said it is preparing the biggest credit-rating cuts since subprime-mortgage defaults rocked financial markets.

The yen rose versus all 16 most-traded currencies as investors retreated from carry trades and sold higher-yielding assets bought with loans from Japan. The yen also advanced as Bank of Japan Governor Toshihiko Fukui signaled interest rates may have to rise.

"There's been a broad-based retreat from risk across the board, and the yen always benefits in that environment," said Simon Derrick, chief currency strategist at the Bank of New York Mellon Corp. in London.

Yuan weakens
The yuan fell for a second day after the central bank set the reference rate for trading weaker, suggesting China wants to promote two-way movements to deter speculators betting on gains.

"The markets are pricing in quite aggressive appreciation for the yuan but the central bank isn't allowing it just yet," said Steven Chang, global markets vice president at State Street Bank & Trust Co. in Hong Kong.

The yuan fell 0.03 per cent to 7.4025 per dollar as of the 5:30 p.m. close in Shanghai, according to the China Foreign Exchange Trade System. Forwards contracts in the currency show the yuan will reach an implied rate of 6.7235 in 12 months.

Peso rose
The Philippine peso rose against the dollar as the benchmark stock index had its longest winning streak in more than a month, raising optimism foreign investors will increase purchases of the nation's stocks.

The currency had its biggest rally since November 9 as the equity index climbed for a third day after foreign investors bought $22 million more Philippine shares than they sold on November 29, the most since October 5.

Money sent home from Filipinos working abroad before the Christmas holidays has also spurred gains in the currency, which has risen 2.3 per cent over the past month.

The peso advanced to 42.295 per dollar at the 4 p.m. close of onshore trading, according to Tullett Prebon Plc, the world's second-largest inter-dealer broker. That was a 1.1 per cent gain from its close at 42.750 on November 29, according to the Bankers Association of the Philippines. Markets were shut on November 30 for a public holiday.

The currency is the top performer in Asia outside of Japan this quarter, rising 6.5 per cent, as traders bet the Federal Reserve will lower interest rates to support economic growth.