$Stock*Shop*Charts*News*Option$

[d272]

BL: Yen Falls as Rally in Stocks Boosts Higher-Yielding Currencies

By Stanley White

May 2 (Bloomberg) -- The yen fell for a second day against the dollar and declined against the euro as gains in stocks encouraged investors to increase holdings of higher-yielding assets funded in Japan.

The currency fell the most against the South African rand and the British pound, two favorites of so-called carry trades, as Asian shares rallied on signs that credit-market turmoil is easing. The dollar headed for its first back-to-back weekly gain this year against the euro on speculation data will show U.S. companies are shedding workers at a slower pace, bolstering the case for the Federal Reserve to stop cutting interest rates.

``With stocks rising this much, it doesn't augur well for the yen,'' said Mitsuru Sahara, senior currency sales manager at Bank of Tokyo-Mitsubishi UFJ Ltd., a unit of Japan's second- biggest lender. ``Calm is returning to financial markets, and that allows currency traders to focus on rate differentials. The Fed may not have to cut rates much further, prompting a reversal in bets on dollar declines.''

The yen fell to 104.62 per dollar at 11:02 a.m. in Tokyo from 104.43 late yesterday in New York. It declined to 161.87 against the euro from 161.57. The dollar traded at $1.5474 per euro from $1.5474 yesterday, when it touched $1.5431, the highest since March 25. The pound bought $1.9780 from $1.9748. Japan's currency may weaken to 105 per dollar today, Sahara forecast.

To contact the reporter on this story: Kosuke Goto in Tokyo at [e-mail]. Stanley White in Tokyo at [e-mail]
Last Updated: May 1, 2008 22:16 EDT