Dec. 13 -- The yen rose against the dollar, rebounding from a one-month low, as U.S. banks said subprime- mortgage losses will widen, prompting investors to shun higher- yielding assets funded by loans in Japan.
The yen gained against all 16 of the most-active currencies after Bank of America Corp., Wachovia Corp. and PNC Financial Services Group Inc. said losses tied to bad debt will be worse than expected, heightening concern coordinated action by central banks may not be enough to ease the credit squeeze. Asian stocks fell, damping confidence in so-called carry trades.
``More writedowns from American banks are spurring risk aversion,'' said Lee Wai Tuck, a currency strategist at Forecast Singapore Ltd. ``The yen is being bought. The fall in stocks is also helping the yen to gain.''
The yen climbed to 111.96 per dollar at 10:38 a.m. in Tokyo from 112.24 yesterday, when it fell to a one-month low of 112.47. It gained to 164.78 per euro from 165.04. The currency may rise to 111.60 per dollar and 164.50 versus the euro today, Lee said.
Against the dollar, the euro traded at $1.4719 from $1.4706, the British pound was at $2.0448 from $2.0469, and the Swiss franc was at 1.1334 from 1.1347. Central banks led by the Federal Reserve announced yesterday a joint effort to provide banks with more cash, including auctions of loans.
The Australian and New Zealand dollars and the pound dropped the most against the yen. New Zealand's dollar weakened 0.5 percent to 87.80 yen, the Australian dollar fell 0.4 percent to 98.75 yen and the pound slipped 0.4 percent to 228.85 yen. Japan's Nikkei 225 Stock Average declined 1.3 percent, and the MSCI Asia-Pacific Index of regional shares lost 0.5 percent.
Japanese Exporters
The Nikkei had a correlation of minus 0.97 with the yen this quarter, according to data compiled by Bloomberg. A value of minus 1 means the two tend to move in opposite directions.
``Japanese stocks are weak and this is putting pressure on the yen to rise,'' said Tokichi Ito, deputy general manager of foreign exchange in Tokyo at Trust & Custody Services Bank Ltd., a unit of Japan's second-largest publicly traded lender. ``Declining equities show investors are still wary of risk. We can't say the subprime loan problem is over.''
The yen may rise to 111.70 against the dollar and 164.50 per euro today, Ito said.
Japan's currency also gained as Japanese exporters bought the currency to settle their accounts.
``Exporters are likely to scoop up the yen,'' said Hiroshi Yoshida, foreign-exchange trader in Tokyo at Shinkin Central Bank, Japan's fifth-largest publicly traded lender by assets. ``It fell to really attractive levels yesterday, so these companies won't pass up the chance the buy it on the cheap.''
The yen may rise to 111.70 against the dollar today, Yoshida forecast.
Japanese exporters may be encouraged to buy the yen now, because if they entered forward contracts to purchase the currency in the future it would be more expensive. The three- month dollar-yen forward rate was 110.80. A forward is an agreement to trade a predetermined amount of currencies at a specified price on a future date. Forward rates adjust for interest-rate differentials.
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