Yen Drops for Sixth Day Versus Euro on Recovery, Risk Appetite

April 15 -- The yen fell for a sixth day versus the euro, the longest drop since January, as signs the global economy is gaining traction boosted demand for riskier assets.

The yen weakened versus all 16 major counterparts after China’s economy grew at the fastest pace in three years and before data forecast to show manufacturing in the Philadelphia region expanded. The greenback was near a 22-month low versus Canada’s dollar on bets Federal Reserve officials will reiterate they expect to keep interest rates near zero. South Korea’s won rose to its highest since the September 2008 collapse of Lehman Brothers Holdings Inc. as investors bought the nation’s stocks.

“With the slew of economic data signaling the expansion of the global economy and with liquidity remaining ample, risk trades will remain in vogue,” said Masahide Tanaka, a senior strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s second-largest banking group. “This trade will encourage capital flows into riskier assets and away from funding currencies such as the yen.”

The yen dropped to 127.49 per euro as of 12:58 p.m. in Tokyo from 127.29 in New York yesterday, when it reached 127.68, the weakest level since April 5. The dollar was at $1.3649 per euro from $1.3653 yesterday. It reached $1.3692 on April 12, the weakest level since March 18.

The U.S. currency traded at 93.41 yen from 93.23 yen. The greenback fetched C$0.9974 from C$0.9986 yesterday, when it declined to C$0.9954, the lowest level since June 2008.

The MSCI Asia Pacific Index advanced 0.7 percent and the Nikkei 225 Stock Average gained 0.9 percent.

China’s Economy

China’s gross domestic product grew 11.9 percent in the first quarter from a year earlier, the statistics bureau said at a briefing in Beijing today. That was more than the median 11.7 percent estimate in a Bloomberg News survey of 24 economists. Consumer prices rose 2.4 percent in March from a year earlier, today’s data showed, after a 2.7 percent gain in February. Economists forecast a 2.6 percent increase.

“Stronger economic growth and lower inflation in China are very supportive of investor risk appetite and commodity prices,” said John Kyriakopoulos, head of currency strategy in Sydney at National Australia Bank Ltd. “The Australian dollar is likely to strengthen, while ‘safe haven’ currencies such as the dollar and the yen will probably weaken.”

Australia’s dollar advanced to 87.28 yen from 87.17 yen yesterday, and fetched 93.46 U.S. cents from 93.51 cents.

U.S. Data

The Federal Reserve Bank of Philadelphia’s general economic index rose to 20.0 in April from 18.9 in the previous month, according to a separate survey before figures today. Readings greater than zero signal growth.

The Dollar Index traded near a four-week low on prospects that Fed officials will maintain borrowing costs near zero.

Fed Chairman Ben S. Bernanke said in testimony to Congress’s Joint Economic Committee yesterday that policy makers have “stated clearly” that interest rates will be very low for an “extended period.” Atlanta Fed President Dennis Lockhart and San Francisco Fed President Janet Yellen speak today. Fed Governor Kevin Warsh speaks tomorrow.

“Fed policy makers, particularly Bernanke, are reiterating that extremely low rates will be needed for an extended period,” said Adam Carr, a senior economist at ICAP Australia Ltd. in Sydney. “Given this view, the dollar is likely to weaken.”

Futures on the CME Group Inc. exchange showed a 52.1 percent chance the U.S. central bank will raise its target rate for overnight bank lending by at least a quarter-percentage point by November, down from 54.4 percent a week earlier.

Dollar Index

The Dollar Index, which tracks the dollar against those of six major U.S. trading partners, bought 80.206 from 80.190 yesterday when it declined to 80.031, the lowest level since March 18.

South Korea’s won gained for a second day and the Kospi index of shares climbed to a 21-month high as funds based abroad bought more local equities than they sold on all but two days since the end of February. Moody’s Investors Service yesterday raised Korea’s sovereign credit ratings as a report showed the unemployment rate declined in March by the most in more than 10 years. The Bank of Korea also said it will maintain its accommodative policy for the time being.

“We’re seeing investors having a bullish view on Korea’s economic data, which has been consistent with the recovery,” said Mitul Kotecha, Hong Kong-based head of global currency at Credit Agricole CIB. “The question now is what happens in terms of policy, whether we will see a move in interest rates. I see that potentially happening in June.”

The won appreciated 0.3 percent to 1,108.50 per dollar, according to data compiled by Bloomberg. It reached 1,107.60, the highest level since Sept. 15, 2008.