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good news for greenbacks catssss...Treasuries, Dollar Gain as Japan Backs U.S.; Oil, Copper Drop
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By Mark Gilbert

June 12 (Bloomberg) -- Treasuries rose for a second day and the dollar gained after Japanese Finance Minister Kaoru Yosano said his nation’s confidence in U.S. debt is “unshakable” and that the currency’s global status is safe.

The 10-year note rose, driving its yield down six basis points to 3.80 percent as of 11:25 a.m. in London, after reaching 4 percent earlier this week. The dollar strengthened 0.3 percent to $1.4067 per euro and advanced 0.4 percent to 98.05 yen. Crude oil fell from a seven-month high and copper declined for the first time in a week.

“There was clearly a fear that foreign central banks may diversify out of U.S. assets and Yosano’s comments ease those concerns,” said Nick Stamenkovic, a strategist in Edinburgh at RIA Capital Markets Ltd., a securities broker for banks and investors. “Yields near 4 percent represented a great buying opportunity.”

Treasuries and the dollar were buoyed by Yosano’s remarks, two days after Russia said it may reduce holdings of U.S. debt, and by speculation Treasury Secretary Timothy Geithner will reiterate support for a strong dollar at today’s Group of Eight finance ministers meeting in Lecce, Italy. The highest yields on 10-year Treasuries since October drew investors betting that rising unemployment will temper a U.S. economic recovery.

“The U.S. dollar’s position as the world’s reserve currency isn’t under threat,” Yosano, 70, said in an interview in Tokyo on June 10 before leaving for the G-8. “Our trust in U.S. Treasuries is absolutely unshakable.”

Brazil, Russia, China

Brazil and Russia joined China this week in saying they would shift as much as $70 billion of reserves into multicurrency bonds issued by the International Monetary Fund. China is the largest U.S. creditor, holding $767.9 billion of U.S. debt as of March, according to Treasury Department figures. Japan is second with $686.7 billion.

Signs that consumer spending is improving helped push Asian stocks higher for a third day. The MSCI Asia Pacific Index climbed 0.3 percent after government reports showed China’s retail sales jumped 15.2 percent last month and Japan’s household sentiment rose to a 14-month high. China’s central bank said lending doubled in May to 664.5 billion yuan ($97 billion) from a year earlier.

Li & Fung Ltd., the biggest supplier of clothes and toys to Wal-Mart Stores Inc., jumped 6.2 percent to HK$23.20.

Stocks Fluctuate

Europe’s Dow Jones Stoxx 600 Index fluctuated between gains and losses as the gauge traded at 25.5 times earnings, the most expensive level since 2004, according to weekly data compiled by Bloomberg. U.S. stock-index futures were little changed before a report that may show confidence among U.S. consumers rose for a fourth straight month in June.

Latvia’s OMX Riga stock index rose 2 percent to 235.68, the highest in three and a half months. The government is preparing spending cuts to avoid a currency devaluation, after the worst recession since at least 1995 undermined investor confidence in the nation’s ability to qualify for the euro and stoked concern loans made by Swedish banks might not be repaid.

Crude oil for July delivery fell as much as 1.61 percent to $71.71 a barrel on the New York Mercantile Exchange, on speculation that crude’s advance to a seven-month high isn’t justified by global demand. Copper for delivery in three months dropped 1.7 percent to $5,285 a metric ton on the London Metal Exchange, leading a decline in industrial metals.

The U.S. currency pared a weekly decline after the Wall Street Journal reported that the Federal Reserve will resist pressure to increase bond purchases, avoiding adding to the supply of dollars.

‘Geithner Support’

“The G-8 meeting may provide some temporary support for the U.S. dollar,” said Andrew Milligan, head of global strategy at Standard Life Investments in Edinburgh, which oversees the equivalent of $165 billion. “Geithner has been careful to express his support for the U.S. currency.”

Overseas demand rose at a 30-year U.S. Treasury auction yesterday. Indirect bidders, a class of investors that includes foreign central banks, bought 49 percent of the bonds on offer, the biggest percentage since the Treasury reintroduced the 30- year security in 2006.

“It was particularly telling that strong foreign interest for U.S. bonds came at a time when Brazil and Russia announced plans to buy $20 billion of bonds from the IMF,” Mitul Kotecha, head of global foreign-exchange strategy in Hong Kong at Calyon, the investment banking arm of Credit Agricole SA, wrote in a research note today.