Yen Drops as Recovery Signs, Stock Gains Buoy Risk Sentiment

April 26 (Bloomberg) -- The yen fell against higher- yielding currencies as signs that a worldwide economic recovery is gaining momentum boosted demand for riskier assets.

Japan’s currency dropped against all of its most-active counterparts after a report showed U.K. house prices rose for a ninth straight month and before data forecast to show the U.S. housing market is stabilizing. South Korea’s won strengthened to a 19-month high as global funds pumped more money into the nation’s shares to profit from accelerating economic growth.

“Data across the globe underscore the economy is recovering, which then boosts risk sentiment,” said Koichi Kurose, chief strategist in Tokyo at Resona Bank Ltd., a unit of Japan’s fourth-largest banking group. “Buoyant risk sentiment will encourage investors to sell the yen and re- invest in higher-yielding assets.”

The yen fell to 126.22 per euro as of 11:04 a.m. in Tokyo from 125.73 in New York on April 23. The currency also dropped to 94.31 yen per dollar from 93.97 in New York. It earlier slid to 87.61 yen per Australian dollar, the lowest since September 2008, before trading at 87.57 from 87.19 last week. The euro was little changed at $1.3378.

The won rose for a fifth day against the yen, trading at 11.6968 against the Japanese currency from 11.7998 on April 23. It earlier touched 11.6933, the highest since October 2008.

The Nikkei 225 Stock Average rose 2.1 percent and the MSCI Asia Pacific Index of regional shares advanced 1.2 percent.

Pound Gains

The pound climbed to a 12-week high against the yen after London-based Hometrack Ltd. said the average cost of a home in England and Wales increased 0.2 percent from March to 158,400 pounds ($243,000). The S&P/Case-Shiller home-price index in the U.S. climbed 1.3 percent, the first increase since December 2006, according to a Bloomberg News survey of economists before the data is released tomorrow.

“The recovery of economies around the world, including the U.K., appears to be firm,” said Yuji Saito, director of the foreign-exchange department at Credit Agricole Corporate and Investment Bank in Tokyo. “The pound may be bought.”

The U.K. currency advanced to 145.61 yen from 144.49 yen in New York on April 23, after earlier touching 145.71 yen, the highest level since Jan. 29.

Fed’s Policy

The dollar traded near its strongest in almost three weeks versus the yen on speculation the Federal Reserve will move closer to withdrawing stimulus measures at its April 27-28 meeting amid signs the U.S. economic recovery is intact.

Fed policy makers this week will try to decide how and when to sell mortgage-backed securities and reduce its balance sheet, the Wall Street Journal said on April 23, without saying where it got the information.

“Our economists note there is some potential for a very modest reworking of the key policy guidance language,” Gareth Berry, a currency strategist in Singapore at UBS AG, wrote in a research note today. “We continue to look for further dollar strength as the Fed shows every intention of gradually continuing down the path to policy normalization.”

Futures contracts on the Chicago Board of Trade on April 23 showed a 72 percent chance the Fed will raise its benchmark rate at least a quarter-percentage point by its December meeting, up from 66 percent a day earlier.

The U.S. economy expanded 3.4 percent in the first quarter, a Bloomberg News survey of economists showed before the Commerce Department’s report on April 30.