Yen, Dollar Fall on Signs Global Recovery Gathering Momentum

Jan. 7 (Bloomberg) -- The yen and the dollar fell versus the euro as signs that the global economic recovery is gathering momentum boosted demand for higher-yielding assets.

Japan’s currency dropped to a 15-month low against the Australian dollar after a government report showed Australian retail sales rose in November at more than four times the pace expected by economists. The U.S. dollar approached its lowest level in three weeks against the euro on speculation the Federal Reserve will keep interest rates near zero.

“The optimistic global backdrop is fueling risk-taking appetite,” said Danica Hampton, senior strategist of markets at Bank of New Zealand Ltd. in Wellington. “This is encouraging players to buy growth-sensitive currencies like the Australian and New Zealand dollars, particularly against the yen and the greenback.”

The yen declined to 133.24 per euro as of 10:01 a.m. in Tokyo from 133.01 in New York yesterday. Japan’s currency slid to 85.39 versus Australia’s dollar from 84.91, after earlier reaching 85.55, the weakest level since September 2008.

The dollar dropped to $1.4421 per euro from $1.4408 in New York. It declined to $1.4484 per euro on Jan. 5, the lowest level since Dec. 17. The U.S. currency was at C$1.0317 from $1.0324 after sliding to $1.0297, the weakest since Oct. 20.

Australian Retail Sales

Japan’s currency slipped for a second day versus the Australian dollar as the nation’s retail sales rose in November by the most in eight months. Sales climbed 1.4 percent from October, when they gained a revised 0.4 percent, the Bureau of Statistics said in Sydney today. The median forecast of 12 economists surveyed by Bloomberg News was for a 0.3 percent gain.

“The surprisingly strong Australian data dispelled concerns about prospects for higher-yielding currencies,” said Toshiya Yamauchi, manager of foreign-exchange margin trading at Ueda Harlow Ltd. in Tokyo. “With speculation waning about an early exit from credit easing in the U.S., carry trades may resurface, funded in the dollar and the yen.”

Carry trades involve the purchase of higher-yielding assets with amounts borrowed in nations with low interest rates. The benchmarks of 0.1 percent in Japan and zero to 0.25 percent in the U.S. have made the yen and dollar popular for funding such transactions.