Yen Rises as Traders Pare Carry Trades on Credit-Market Losses


The yen rose against all 16 most- active currencies as signs credit-market losses are worsening prompted investors to pare carry trades, where they use funds from Japan to buy higher-yielding assets.

The yen had its biggest gain against the euro in a week as UBS AG said 2008 will probably be ``another generally difficult year'' for financial services companies and the New York Times reported Merrill Lynch & Co. may write down $15 billion from mortgage-related losses. The pound dropped to a record low against the Europe's common currency for a third day and the most in a week against the yen.

The yen advanced to 108.95 per dollar as of 8:24 a.m. in New York, from 109.33 yesterday, declining 0.3 percent this week. It advanced to 161.12 per euro, from 161.88, gaining 0.6 percent in the past five days. The currency may rise to 107.20 against the dollar this quarter and trade at 108 at the end of March, Turner predicted.

The yen rose the most against the Canadian dollar and Swedish krona. It surged 1.4 percent against Canada's currency to 106.70 yen, while climbing 0.7 percent to 17.14 per krona.

It advanced 0.5 percent against the pound to 213.36, boosting its gains for the last two days to 1 percent. The U.K. currency also fell to 75.87 pence per euro, the weakest since the single currency's introduction in 1999, before trading at 75.51 pence from 75.48.

Japan's benchmark interest rate of 0.5 percent is the lowest among major economies. Interest rates are 8.25 percent in New Zealand, 6.75 percent in Australia, 5.5 percent in the U.K. and 4 percent for the 15 countries that share the euro.


TradingEconomics.com, Bloomberg
1/11/2008 8:34:53 AM