YEN FALLS MOST VERSUS DOLLAR IN MORE THAN MONTH ON OIL, STOCKS

STOCKSRATES & BONDSCURRENCIESMUTUAL FUNDSETFsCOMMODITIESECONOMIC CALENDAR
Bloomberg
Bloomberg Anywhere
Updated: New York, Jul 18 01:52
London, Jul 18 06:52
Tokyo, Jul 18 14:52
Search
Symbol Lookup

Home News Market Data Investment Tools TV and Radio About Bloomberg Careers Contact Us
News

* Exclusive
* Worldwide
* Regions
* Africa
* Asia
* Australia & New Zealand
* Canada
* China
* Eastern Europe
* Europe
* France
* Germany
* India & Pakistan
* Italy
* Japan
* Latin America
* Middle East
* U.K. & Ireland
* U.S.
* Markets
* Industries
* Economy
* Politics
* Law
* Invest
* Science
* Opinion
* Spend
* Sports
* Muse Arts
* Audio/Video Reports
* Bloomberg Markets Magazine
* Special Report


RESOURCES

* Bloomberg TV
* Bloomberg Radio
* Bloomberg Podcasts
* Bloomberg Press



Yen Falls Most Versus Dollar in More Than Month on Oil, Stocks

By Bo Nielsen and Ye Xie

July 17 (Bloomberg) -- The yen dropped the most against the dollar in more than a month as a plunge in crude oil pushed stocks higher, encouraging investors to sell the currency to buy higher-yielding assets outside Japan.

The currency also fell versus the euro, South Africa's rand and Sweden's krona as JPMorgan Chase & Co.'s better-than- expected earnings eased concern credit market losses will cut into bank earnings. The dollar pared its decline against the euro as the price of crude oil decreased for a third day.

NOTE: OIL PRICE INCREASE GREATLY AFFECTS CURRENCY.

``People are flocking into the carry trade, and that has the dollar appreciating versus the yen,'' said Jeff Gladstein, global head of foreign-exchange trading at AIG Financial Products in Wilton, Connecticut. ``It looks like a correction is under way in oil.''

The yen fell 1.2 percent to 106.42 per dollar at 4:25 p.m. in New York, from 105.13 yesterday, when it touched 103.77, the strongest since May 27. It dropped 1.4 percent to 168.71 per euro, from 166.39 yesterday. The dollar dropped 0.2 percent to $1.5861 versus the euro, from $1.5827. It touched an all-time low of $1.6038 two days ago.

The price of crude oil for August delivery fell $5.15 to $129.45 a barrel, dropping $15 dollars in three days. The euro- exchange rate and oil have moved in the same direction 90 percent of the time in the past year, according to Bloomberg calculations based on the correlation of their value changes.

Weaker Yen

The yen dropped 2.1 percent to 14.097 against the rand and 2 percent to 17.838 versus Sweden's krona. In the carry trade, investors get funds in a country with low borrowing costs and buy assets where returns are higher. The Bank of Japan held its target lending rate at 0.5 percent this week, the lowest among major economies. The benchmark rates are 12 percent in South Africa and 4.5 percent in Sweden.

The Standard & Poor's 500 Index increased 1.1 percent on the drop in oil and JPMorgan's earnings. The S&P index lost 3.8 percent in the seven trading days ended July 15 and the dollar touched an all-time low versus the euro that day on bets a U.S. government plan to shore up Fannie Mae and Freddie Mac will fail to restore confidence in the two largest buyers of home loans.

``We were extremely bearish,'' said Alan Kabbani, senior currency trader at Wachovia Corp. in Charlotte, North Carolina. ``Now the market is taking some of that bearishness out and becoming a little more confident about the economy and the financial sector.''

JPMorgan Profit

Profit at JPMorgan, the largest U.S. bank by market value, fell 52 percent, less than analysts estimated, on mortgage- related writedowns and costs from the takeover of Bear Stearns Cos. Second-quarter net income of 54 cents a share compared with expectations for 44 cents in a survey of analysts by Bloomberg.

``While earnings are better than expected, it doesn't remove the fact that the dollar is under pressure and the problems with the financial sector are still present,'' said John McCarthy, director of currency trading at ING Financial Markets LLC in New York.

Merrill Lynch & Co., the third-biggest U.S. securities firm, reported its fourth straight quarterly loss as the firm compounded its credit-market writedowns. Global banks and securities firms have reported losses and writedowns of more than $420 billion related to subprime mortgages.

NOTE: MERRILL LYNCH & CO IS ONE OF THE MOST RESPECTED SECURITIES FIRMS.

The greenback weakened versus the euro on a sign of contraction in U.S. regional manufacturing. The Federal Reserve Bank of Philadelphia's general economic index was at minus 16.3 this month, compared with minus 17.1 in June, the bank reported today. Readings less than zero signal a decline. The median forecast of 56 economists surveyed by Bloomberg News was for a reading of minus 15.

Housing Report

Builders started work in June on the fewest single-family U.S. homes since 1991, the Commerce Department said. A change in New York City building codes spurred total starts, including condominiums and apartment buildings, to a four-month high.

Fed Chairman Ben S. Bernanke told the House Financial Services Committee yesterday that growth and inflation risks are increasing and the housing market is the ``central element'' of the crisis.

Yen sales by Japanese individual investors on the Tokyo Financial Exchange climbed to the highest level since August yesterday as gains in the currency made higher-yielding assets abroad cheaper.

Net short positions on the yen against seven major currencies, including the U.S. and Australian dollars, rose to 362,619 contracts among so-called mom-and-pop traders yesterday, the highest since Aug. 14, data showed. The contracts are denominated in 10,000 units of the foreign currency.

China will rely on the yuan's gains to combat inflation as slowing economic growth may prevent the central bank from raising borrowing costs, Goldman Sachs Group Inc. analysts wrote in a research note today.

The yuan has advanced more than 7 percent against the dollar this year, making it the best performer among Asia's most-active currencies. It fell 0.3 percent to 6.8289 today.

To contact the reporters on this story: Bo Nielsen in New York at bnielsen4@bloomberg.net; Ye Xie in New York at yxie6@bloomberg.net.
Last Updated: July 17, 2008 16:28 EDT


Email this article Printer friendly format


Advertisement: Top hedge fund managers reveal how they profit in good times and bad.


Sponsored links



More News

* Some Central Bank Members Want More Focus on Growth Than Inflation Risk

* Most Japan Stocks Fall, Led by Oil Explorers on Crude; Brokerages Advance

* Nintendo Wii Reaches Almost 11 Million in U.S. Sales, Surpassing Xbox 360

Bloomberg.comNEWS | MARKET DATA | INVESTMENT TOOLS | TV AND RADIO | ABOUT BLOOMBERG | CAREERS | CONTACT US | LOG IN/REGISTER
Terms of Service | Privacy Policy | Trademarks | Site Map | Help | Feedback | Advertising | 日本語サイト