Yen Falls From Four-Month High on Importer Sales, Chart Signals

July 9 -- The yen fell from a four-month high against the dollar on speculation Japanese importers sold the currency and as technical charts signaled its 3 percent gain in the past five days was excessive.

The yen weakened versus all of the 16 major counterparts after a Japanese government official said excessive currency movements were undesirable and as Asian stocks trimmed losses, encouraging investors to buy higher-yielding assets. The yen and the dollar also declined after the International Monetary Fund said the global recovery next year will be stronger than it forecast in April as the financial system stabilizes, sapping demand for the safety of the two currencies.

“The yen’s surge was very fast, so a correction of this is under way,” said Nobuaki Kubo, vice president of foreign exchange in Tokyo at BBH Investment Services Inc., a unit of New York-based Brown Brothers Harriman & Co. “There’s also talk of importers and bargain hunters who are selling the yen.”

The yen declined to 93.13 versus the dollar as of 6:57 a.m. in London from 92.88 in New York yesterday, when it rose to 91.81, the highest level since Feb. 17. Japan’s currency dropped to 129.57 per euro from 128.95, after climbing to 127.02 yesterday, the strongest since May 18. The euro rose to $1.3920 from $1.3884.

The Dollar Index, which tracks the U.S. currency against those of six major trading partners including the euro, yen and pound, fell 0.4 percent to 80.442.

Technical Indicator

The dollar’s 14-day stochastic oscillator against the yen was at 19.9 yesterday, below the 20 level that signals it may have fallen too quickly and is poised to rise. In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a currency.

Japan’s government is closely watching market moves after the yen climbed to a four-month high against the dollar, Chief Cabinet Secretary Takeo Kawamura said at a news conference today, according to a Reuters report.

The MSCI Asia-Pacific excluding Japan Index of shares trimmed its loss to 0.2 percent after earlier dropping as much as 0.5 percent. Standard & Poor’s 500 futures gained 0.4 percent.

Higher-yielding currencies advanced as signs that stocks are stabilizing encouraged investors to purchase riskier assets.

Australia’s dollar climbed 0.3 percent to 72.54 yen and rose to 77.91 U.S. cents from 77.86 cents. New Zealand’s dollar rose 0.4 percent to 58.37 yen and climbed to 62.71 U.S. cents from 62.60 cents.

Carry Trades

Japan’s benchmark interest rate of 0.1 percent compares with 3 percent in Australia and 2.5 percent in New Zealand. That attracts investors to carry trades in which they borrow funds in countries with lower interest costs and buy assets in nations with higher rates, allowing them to pocket the difference.

The world economy will expand 2.5 percent in 2010, compared with an April projection of 1.9 percent growth, the IMF said yesterday in a revised forecast.

“The firm undertone of stocks in Asia means the global economy is not falling apart, even if it is not recovering at the strong pace the market had hoped for,” said Akio Yoshino, chief economist in Tokyo at Societe Generale Asset Management (Japan) Co. “Given the assumption that the global economy will continue to grow, albeit at a slow pace, there is no reason to keep buying the yen as a haven.”

Indonesia’s rupiah, the best-performing Asian currency over the past three months, rose for a third day as exit polls pointed to a landslide victory for President Susilo Bambang Yudhoyono, paving the way for more pro-growth policies.

Yudhoyono is leading his rivals with 61 percent of votes, according to a preliminary count by the Indonesia Survey Institute. The $433 billion economy may expand as much as 4 percent this year, the fastest pace in Asia after India and China, the IMF estimates.

‘Best Case’

“It was the best-case scenario,” said Tim Condon, Singapore-based head of Asia research at ING Groep NV. “The rupiah will rally to 10,000 to the dollar. I see any dollar strength right now from global risk aversion as a chance to sell dollars and buy rupiah.”

The rupiah rose 0.6 percent to 10,185 per dollar, extending its gains to 11 percent in the past three months.

South Korea’s won declined for a fourth day against the dollar after the central bank left its benchmark rate unchanged at a record low for a fifth month.

The Bank of Korea held the seven-day repurchase rate at 2 percent, as expected by all economists surveyed by Bloomberg News. The bank slashed rates by 3.25 percentage points between October and February, the steepest cuts since it began setting a policy rate a decade ago.

The won fell 0.2 percent to 1,278.95 per dollar, after declining to 1,282.25, the weakest level since June 30.

G-8 Meeting

The yen strengthened earlier after Group of Eight leaders said yesterday the global economic recovery is too fragile to withdraw stimulus efforts, bolstering demand for the currency as a refuge from the slump.

U.S. President Barack Obama called for the door to remain open to more stimulus measures as a renewed stock-market drop stirred concern that $2 trillion spent worldwide so far hasn’t jolted consumers and businesses back to life.

“The rebound of the dollar will come to a halt at around 93.50 yen as people become less optimistic about the prospects of the global economic recovery,” said Hiroshi Maeba, deputy general manager of foreign exchange trading at Nomura Securities Co. in Tokyo.

The yen typically strengthens during times of financial turmoil because Japan’s trade surplus means the nation doesn’t have to rely on overseas lenders.