April 16 (Bloomberg) -- The yen advanced against all of its most-traded counterparts as stocks dropped after Goldman Sachs Group Inc. was charged by U.S. regulators with fraud, deterring demand for higher-yielding assets.
The euro recorded its second week of losses against the yen on speculation Greece would be forced to activate a 45 billion euro ($61 billion) rescue package as it struggles to rein in the euro region’s widest budget shortfall. Australia’s dollar fell against its U.S. counterpart as China raised minimum mortgage rates for some home purchases.
“The Goldman story is pulling the stock market down, and you’re getting a flight to quality into the yen,” said Carol Hurley, a senior market strategist in Chicago at Lind-Waldock & Co., a unit of futures broker MF Global Holdings Ltd. “It’s most definitely weighing on risk sentiment.”
The yen appreciated as much as 1.9 percent to 123.87 per euro in the biggest intraday advance since Feb. 25, before trading at 124.40 at 4:14 p.m. in New York, compared with 126.27 yesterday. The dollar climbed 0.5 percent to $1.3505 per euro, from $1.3573. Japan’s currency gained 1 percent to 92.13 per dollar, from 93.03.
South Africa’s rand slid 2.1 percent to 12.47 yen and Mexico’s peso lost 1.8 percent to 7.51 yen on speculation investors will reduce carry trades, in which they buy higher- yielding assets with amounts borrowed in nations with low interest rates. Japan’s benchmark of 0.1 percent has made the yen popular for funding such transactions.
Goldman Sachs
The Standard & Poor’s 500 Index fell 1.6 percent after Goldman Sachs was accused of fraud related to collateralized debt obligations that contributed to the worst financial crisis since the Great Depression.
The company misstated and omitted key facts about a financial product tied to subprime mortgages as the U.S. housing market was starting to falter, the Securities and Exchange Commission said in a statement today.
“The SEC’s charges are completely unfounded in law and fact and we will vigorously contest them and defend the firm and its reputation,” Goldman Sachs said in a statement.
Yuan forwards erased losses as President Hu Jintao reiterated that China is moving ahead with a gradual “managed” floating exchange-rate plan.
“We have been proceeding with a managed floating exchange- rate mechanism under the principle of initiative, control and gradualism as always,” Hu said in a speech published on the Web site of the Ministry of Foreign Affairs. “Despite the huge difficulty we faced after the international financial crisis, we have kept the yuan exchange rate relatively steady, which promoted the stability of the international financial system.”
Hu at Summit
Hu made the speech yesterday when he was attending a summit in Brazil involving the leaders of Brazil, Russia, India and China, according to the Web site. Chinese Foreign Ministry spokesman Ma Zhaoxu said today the value of the yuan wasn’t discussed at the meeting in Brasilia.
Twelve-month non-deliverable yuan forwards were little changed at 6.6140 per dollar, reflecting bets the currency will strengthen more than 3 percent from the spot rate of 6.8255, according to data compiled by Bloomberg.
China has pegged the yuan at about 6.83 against the dollar since July 2008, after allowing it to rise 21 percent in the previous three years.
The Australian dollar dropped 0.9 percent to 92.58 U.S. cents as China’s cabinet said “more forceful” steps are needed to cool speculation after property prices rose at a record pace in March. China is Australia’s biggest trading partner.
Yen Versus Euro
The yen posted a second weekly gain versus the euro, advancing 1.1 percent in the longest stretch of increases since the five days ended Feb. 5. Japan’s currency appreciated 1.1 percent against the dollar this week.
European Union finance ministers said Greece doesn’t have an immediate plan to trigger a rescue package even as the country’s bond yields rose this week to the highest level since before the bailout plan was announced.
Spanish Finance Minister Elena Salgado, whose government holds the EU presidency, said ministers won’t decide on any further action at a two-day meeting in Madrid that began today.
“The Greece story is limiting the euro’s capacity to rally,” said Alan Ruskin, head of currency strategy at Royal Bank of Scotland Group Plc in Stamford, Connecticut. “There is still a lack of enthusiasm for euros.”
Brazil’s real, the best-performing emerging-market currency in the past year, will surge more than 9 percent by the end of 2010 even as the central bank seeks to curb gains by purchasing dollars, according to Stone Harbor Investment Partners.
The currency will appreciate to 1.6 per dollar, driven by higher commodities prices, Pablo Cisilino, who manages $12.5 billion in emerging-market debt in New York, said in an interview.
The real declined 0.5 percent to 1.7576 after reaching 1.7320 yesterday, the strongest level since Jan. 11.
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