Dollar Falls Against Yen on Bets Fed Will Lower Rate 0.75-Point

The dollar fell for a sixth straight day against the yen and traded near a record low versus the euro as traders increased bets that the Federal Reserve will lower interest rates by 0.75 percentage point this month.

The U.S. Dollar Index, which compares the currency with those of six trading partners, dropped as futures showed a 74 percent likelihood the Fed will reduce rates to 2.25 percent. Last week, traders saw no chance of a cut that steep. Canada's currency fell after the Bank of Canada cut rates today to help offset a slump in exports to the U.S.

The dollar will remain under pressure, said Omer Esiner, an analyst at currency-trading company Ruesch International Inc. in Washington. The U.S. economy is looking weak.

The dollar fell to 103.08 yen at 9:10 a.m. in New York, from 103.49 yen yesterday, when it fell to 102.62 yen, the lowest since Jan. 28, 2005. The U.S. currency traded at $1.5202 per euro, from $1.5204 yesterday, when it touched $1.5275, the weakest level since the European currency's 1999 debut.

Don't fight the dollar weakness, a team of strategists at Zurich-based UBS AG, led by Mansoor Mohi-uddin, wrote in a research report published today. This week's U.S. data will likely increasingly suggest a recession, they wrote.

The U.S. Dollar Index traded on ICE Futures in New York was at 73.584 after declining to a record low of 73.354 yesterday. The slump in the U.S. currency helped push the price of oil to a record of $103.95 yesterday and gold to an all-time high of $989.54 an ounce.

`Grossly Misaligned'

The yen advanced to 156.71 per euro from 157.35.

UBS Wealth Management Research, a unit of UBS, wrote in a separate report that the world's foreign-exchange markets are grossly misaligned and Asian currencies may appreciate sharply.

The Singapore dollar reached S$1.3897 against the U.S. currency, a decade-high, before trading at S$1.3904, from S$1.3910 yesterday. The Taiwan dollar advanced 0.6 percent to NT$30.922 per dollar.

The Australian dollar, also known as the Aussie, fell as the central bank governor said there is evidence consumer spending is moderating. The central bank raised the main rate to 7.25 percent today, the highest in 12 years. The Aussie was at 93.29 U.S. cents, from 93.96 cents yesterday and 94.98 on Feb. 28, the highest since March 1984.

The Australian dollar is likely to be sold hard in the near-term, Hans-Guenter Redeker, head of currency strategy in London at BNP Paribas SA, one of the world's 10 biggest currency traders, wrote in a note to clients. A support level at 92.75 cents per dollar looks set to be broken, he said.

`Anxious to Sell'

The dollar may fall below 100 yen in one or two months as Japanese investors lose confidence in dollar-denominated assets, Tomoko Fujii, head of Japan economics and strategy at Bank of America Corp. in Tokyo, wrote in a research note.

Futures on the Chicago Board of Trade show investors have raised wagers on deeper rate reductions since Fed Chairman Ben S. Bernanke suggested last week the central bank was ready to lower borrowing costs further to bolster the economy.

A lot of traders are anxious to sell the dollar, said Hiroshi Yoshida, foreign-exchange trader in Tokyo at Shinkin Central Bank. The U.S. economy looks weak.

The U.S. currency may fall to 102 yen this week, he said.

The euro gained 15 percent against the dollar in the past year, eroding the competitiveness of European exports. The synthetic euro, which estimates the European currency's value before its inception in 1999, yesterday rose to the strongest level since at least January 1989, when Bloomberg's data on the measure began.

Dollar Poised for Weekly Decline Against Yen on Slowing Economy

The dollar headed for a weekly loss against the yen before a private report that economists say will show U.S. consumer confidence fell to the lowest in more than two years.

The U.S. currency may decline for a fourth week against the Swiss franc after Federal Reserve Chairman Ben S. Bernanke said yesterday the bank is ready to take substantive additional action to help the economy, fueling speculation he will cut the benchmark interest rate at least a half percentage point this month. The yen has gained versus the 16 most-active currencies this week as a slump in global stocks caused investors to pull back from higher-yielding assets.

Dollar-yen is falling in the weak U.S. dollar environment and rising risk aversion, said Besa Deda, senior markets economist at St. George Bank Ltd. in Sydney. Bernanke's comments reinforce that the Fed is likely to cut by 50 basis points. There's a good chance of a U.S. recession.

The dollar traded at 106.81 yen at 10:38 a.m. in Tokyo, compared with 106.54 yesterday in late New York and 108.84 yen on Jan. 11. It touched 105.92 yen two days ago, the lowest since May 2005. The dollar was at $1.4626 per euro from $1.4642 yesterday and $1.4776 last week. It was at 1.1016 versus the franc from 1.1010 yesterday and 1.1014 last week.

The euro touched 155.70 yen, a four-month low, before trading at 156.16 yen from 155.99 yesterday and 160.79 on Jan. 11.

The dollar may decline to 106 yen today, Deda said.

Yen Gains

Japan's currency gained the most against the South African rand this week as concern that the U.S. economic slowdown will spill over to the rest of the world prompted investors to exit so-called carry trades financed with borrowed yen. The rand, which has been a destination for carry trades, was at 15.06 yen from 14.99 yesterday and 16.1 a week ago. It touched 14.95 yesterday, the weakest since Aug. 17.

Japan's 0.5 percent target rate is the lowest among the developed nations. South Africa's benchmark is 11 percent. The Standard & Poor's 500 Index lost 2.9 percent. With a 9.2 percent drop since Dec. 31, the index is off to its worst start to a year ever.

Carry trades are completely out of favor, said Sue Trinh, a currency strategist at RBC Capital Markets in Sydney, in an interview with Bloomberg Television. `At the moment we're seeing a rise in risk aversion. The yen is benefiting.

The Reuters/University of Michigan preliminary index of consumer sentiment probably dropped to 74.5 in January from 75.5 in December, which was the lowest since October 2005, according to the median estimate of economists surveyed by Bloomberg News.

Outlook has Worsened

Bernanke reiterated that the outlook for growth in 2008 has worsened and the downside risks to growth have become more pronounced. In his testimony to the House Budget Committee in Washington, he also said a temporary fiscal stimulus of as much as $150 billion would help revive economic growth.

U.S. President George W. Bush will today lay out the general principles he favors for a short-term stimulus, Deputy Press Secretary Tony Fratto said yesterday.

Interest-rate futures on the Chicago Board of Trade showed a 100 percent likelihood the Fed will lower the target for the overnight lending rate between banks by at least a half- percentage point to 3.75 percent on Jan. 30. The chance of a cut to 3.5 percent this month was 44 percent.

The yen may pare its 3 percent gain versus the euro this week as technical charts which traders often use to judge price movements show the Japanese currency's advance to be excessive.

The euro's 14-day stochastic oscillator chart reached 6.3 today, according to data compiled by Bloomberg. A level below 20 suggests the euro has fallen too fast against the yen.

The yen has been overbought, said Lee Wai Tuck, a currency strategist at Forecast Pte Ltd. in Singapore. The market is pretty long the yen. There's a bit of yen-selling.

Stochastic oscillator charts measure the closing price of a security relative to its highs and lows during a particular period to try to predict a rise or fall.

Dollar Posts Biggest Drop Versus Yen in Almost 2 Months on Jobs

The dollar posted its biggest decline against the yen in almost two months as a slowdown in hiring raised concern that U.S. economic weakness will spread globally.

The U.S. currency fell this week against the euro and Swiss franc as traders priced in for the first time a more than 50 percent chance the Federal Reserve will cut borrowing costs by a half-percentage point on Jan. 30. Import prices were unchanged last month, easing concern inflation is accelerating, the government is forecast by economists to report next week.

The dollar is going to remain on the defensive, said Robert Sinche, head of global currency strategy in New York at Bank of America Corp. He says the U.S. currency may approach the all-time low of $1.4967 per euro reached Nov. 23.

The dollar weakened 3.3 percent this week to 108.60 yen, the biggest drop since November. It decreased to $1.4743 per euro from $1.4723, extending a 2.4 percent plunge the previous week that was the biggest since April 2006, and fell 1.6 percent to 1.1083 Swiss francs.

The yen rose against all of the 16 most actively traded currencies this week as the slowdown in U.S. hiring encouraged investors to cut back on holdings of higher-yielding assets funded in Japan. The Standard & Poor's 500 Index fell 4.5 percent this week, its biggest drop since July.

Japan's currency jumped 3.2 percent to 160.09 per euro, the biggest increase since the week ended Aug. 17, the day the U.S. central bank cut the discount rate to mitigate a global rout in credit markets.

Yen's Advance

The yen increased 3.9 percent against the Australian dollar and 4.4 percent against the South African rand, two favorites of the carry trade.

If the U.S. is going to fall into recession, the world economy will slow down significantly, said Matthew Strauss, senior currency strategist in Toronto at RBC Capital Markets Inc., a unit of Canada's biggest bank by assets. Investors will shun risky assets and carry trades.

Japan's benchmark lending rate of 0.5 percent, the lowest among major economies, compares with 11 percent in South Africa, 6.75 percent in Australia and 4 percent in the 15 countries that use the euro. In the carry trade, investors borrow in countries with lower lending rates and use the cash to buy assets where higher returns are offered. The risk is that currency fluctuation can erase profits.

U.S. employers added 18,000 positions to their payrolls last month, capping the worst year for job creation since 2003, the Labor Department said yesterday. The median forecast of 74 economists surveyed by Bloomberg News was for 70,000 new jobs. The unemployment rate rose to 5 percent, a two-year high.

`Risk Appetite'

Clearly the labor market is weakening, said Jay Bryson, global economist in Charlotte, North Carolina, at Wachovia Corp. This is not good for global risk appetite.

The U.S. Dollar Index traded on ICE Futures in New York declined 0.6 percent this week to 75.793. The index, valuing the currency's performance against those of six of the biggest U.S. trading partners, has had the worst start of a year since the turn of the millennium.

The chance the Fed will reduce the benchmark lending rate of 4.25 percent by a half-percentage point on Jan. 30 rose to 66 percent from 34 percent two days ago and no chance a week ago, interest rate futures contracts on the Chicago Board of Trade showed. The odds of a quarter-point cut were 34 percent.

Prices of goods imported into the U.S. were unchanged in December after a 2.7 percent increase the previous month, according to the median forecast of 35 economists surveyed by Bloomberg News. The Labor Department report is due Jan. 11.

China's yuan advanced against the dollar for a fourth week, rising 0.4 percent to 7.274 per dollar, as a local newspaper reported that the central bank signaled it will allow faster gains in the currency to help curb inflation.

Source - Bloomberg

Yen Rises as Subprime Losses Spur Higher-Yielding Asset Sales

The yen rose against 16 of the most- actively traded currencies as losses related to U.S. subprime mortgages widened, prompting investors to sell higher-yielding assets funded by loans made in Japan.

The currency gained the most versus the Australian and New Zealand dollars as Freddie Mac, the second-biggest U.S. mortgage- finance company, reported a record loss and the Federal Reserve reduced its 2008 economic growth forecast. Crude oil rose above $99 a barrel, which may slow consumer spending and put pressure on the central bank to cut interest rates.

Subprime problems are far from done, said Saburo Matsumoto, senior manager of foreign-exchange sales at Sumitomo Trust & Banking Co. in Tokyo, Japan's fifth-largest lender by assets. The yen is being buoyed by it.

The yen climbed to 162.58 per euro as of 12:30 p.m. in Tokyo from 163.21 in New York yesterday. It was at 109.64 against the dollar from 109.97. The dollar traded at $1.4828 per euro, after reaching $1.4852 yesterday, the lowest since the single European currency's debut in 1999.

Japan's currency may rise to 107 per dollar this year, Matsumoto said.

Australia's dollar slipped to 97.27 against the yen from 98.13, New Zealand's dollar weakened to 83.46 from 84.15, and South Korea's won declined to 11.847 from 11.945.

Default Swaps

The risk of owning debt of financial firms from Citigroup Inc. to Bear Stearns Cos. rose on concern that credit-market losses will increase, according to credit-default swaps, which are used to speculate on the ability of companies to repay their debt. Countrywide Financial Corp., the biggest U.S. mortgage lender, denied it will file for bankruptcy linked to speculation of a cash shortage.

The yen will remain strong on the back of risk reduction, said Hiroshi Sudo, senior manager in the department of solution and sales at Central Tanshi Online Trading Co., Ltd., a Tokyo-based foreign-exchange margin trader that handles 45 billion yen ($409 million) in customers' money.

Japan's currency may rise to 105 per dollar in January, Sudo forecast.

The yen gained 5.7 percent against the Korean won this quarter, 4.8 percent versus the Australian dollar and 4.2 percent against New Zealand's, as the countries' interest-rate premiums made them attractive for so-called carry trades.

Dollar Losses

The dollar may extend losses as traders bet the Fed will cut interest rates a third time to keep the economy from slipping into recession. The U.S. consumes one quarter of the world's oil, the price of which has risen 62 percent this year to a record.

Reports today may show the Commerce Department's index of for the U.S. economic outlook fell in October and the Reuters/University of Michigan's final consumer confidence gauge stayed at a two-year low this month.

The U.S. Dollar Index traded on ICE Futures U.S. in New York, which measures the currency against six major counterparts including the euro, yen and British pound, reached a record low of 74.978 on Nov. 9, the weakest since the index started in 1973. It last stood at 75.155. The U.S. currency was also near an all- time low versus the Swiss franc.

The most likely path for the dollar into the year-end remains down, said John Horner, a currency strategist in Sydney at Deutsche Bank AG, the world's largest currency trader. The Fed will probably respond to weaker growth with a further lowering of rates.

The dollar dropped to a record low of 1.1055 versus the Swiss franc before trading at 1.1060 from 1.1058 yesterday. The U.S. currency will decline to $1.50 versus the euro by the end of the year, Horner forecast.

Source - Bloomberg

Japan's Exports Rise to Record on Asia, Europe Demand

Japan's exports rose to a record in October as companies shipped more cars and electronics to Asia and Europe, easing concern that a slowdown in the U.S. will cool the economy's expansion.

Exports climbed 13.9 percent from a year earlier, the Finance Ministry said in Tokyo today, double September's pace. That helped lift the trade surplus 66.1 percent to 1.02 trillion yen ($9.3 billion) as imports gained 8.6 percent.

Shipments to China and the European Union surged to the highest ever, cushioning a drop in exports to the U.S., where the worst housing recession since 1991 is crimping demand. Toyota Motor Corp.'s profit rose 11 percent last quarter, helped by sales of Camry sedans in Europe and Asia.

Exports will probably remain the main driver of Japan's economic recovery this quarter, said Susumu Kato, chief economist at Calyon Securities in Tokyo. Demand in Asia and Europe will compensate for a slowdown in shipments to the U.S. for the time being.

The trade surplus will be tested this month as the yen's rise to a 1 1/2-year high against the dollar hurts exporters and oil approaching $100 a barrel increases the nation's import bill. Oil climbed above $99 for the first time in New York today.

Japan's currency has gained 5.3 percent against the dollar and 2.9 percent versus the euro this month. It traded at 109.62 per dollar at 12:29 p.m. in Tokyo from 109.83 before the report.

China, Asia

Shipments to China increased 19.2 percent to a record 1.17 trillion yen in October, faster than the 16.4 percent in the previous month, the ministry said. Export growth to Asia accelerated to 12.9 percent from a year earlier.

Manufacturers have turned to China and India, the fastest growing major economies, to shield them from a slowdown in the U.S., where a fifth of Japan's exports are sent. Toyota increased sales in China by 57 percent in the three months ended Sept. 30, helping offset a 5 percent decline in the U.S.

Source - Bloomberg

Yen Near 1 1/2-Year High Versus Dollar on Credit-Market Risks

The yen traded near a 1 1/2-year high versus the dollar as concern increased that credit-market losses will slow global economic growth, pushing investors to sell higher-yielding assets funded by loans in Japan.

Japan's currency rose against the Australian and New Zealand dollars, favorites of the carry trade, after stocks fell in the U.S. and futures showed equities in Tokyo are likely to decline today. Japan has the lowest benchmark interest rate among industrialized nations. Demand for the dollar may weaken on expectations a government report today will show U.S. housing starts dropped to a 14-year low in October.

This will be a good day for the yen, said Paul Milton, chief dealer at Societe Generale SA in Sydney. Asian stocks are likely to catch up with U.S. equities.

The yen traded at 109.74 per dollar at 7:57 a.m. in Tokyo from 109.76 late in New York yesterday. The yen rose to 109.13 per dollar on Nov. 12, the highest level since May 2006, and may advance to 109.30 today, Milton said. Japan's currency was little changed at 160.96 per euro from 160.95 yesterday. The dollar traded at $1.4664 per euro from $1.4665.

The yen climbed against all 16 of the world's most-active currencies yesterday as Goldman Sachs Group Inc. said in a report that Citigroup Inc., the largest U.S. bank by assets, may write down $15 billion in collateralized debt obligations over the next two quarters.

The Standard & Poor's 500 Index fell 1.8 percent yesterday. Nikkei 225 Stock Average futures due in December traded at 14,765 in Chicago, compared with the index's close yesterday in Tokyo of 15,042.56. The two-year Treasury note's yield fell to the lowest since 2005 as investors sought safety in U.S. government debt.

Yen Strength

The market is very nervous, said Jonas Thulin, a senior currency strategist at Calyon Securities Inc. in New York. People are holding a sober view that we haven't seen the worst from the subprime and credit issue yet. It pushed people to buy the yen and sell risky assets.

The yen has strengthened against all 16 most-traded currencies this month, gaining 12 percent versus Australia's dollar and 8.3 percent against New Zealand's.

In carry trades, investors borrow money in low-yielding economies such as Japan and lend the funds in high-yielding countries to profit from the spread. The risk is that currency moves wipe out earnings. When the trade weakens, traders sell higher-yielding assets and buy yen to repay borrowings.

The benchmark rate in Australia is 6.75 percent while New Zealand's is 8.25 percent. Japan's borrowing cost is 0.5 percent.

Jitters in the market contributed to the strengthening in the yen, said Stephen Malyon, a currency strategist at Scotia Capital Inc. in Toronto.

U.S. Housing Starts

The U.S. currency weakened to an all-time low of $1.4752 per euro on Nov. 9. The dollar has lost 10 percent against the euro and 7.8 percent versus the yen this year as two rate cuts by the Federal Reserve dimmed the allure of U.S. assets.

Today's Commerce Department report will show housing starts fell to an annualized rate of 1.17 million in October, from 1.19 million during September, according to a Bloomberg survey. The data is scheduled for release at 8:30 a.m. Washington time.

The Fed is scheduled to release the minutes from its Oct. 31 meeting at 2 p.m. in Washington. The central bank cut the target rate for overnight loans between banks to 4.5 percent last month, after a 50-basis-point reduction in September. The central bank is also expected to release quarterly forecasts for the economy and inflation.

Futures traded on the Chicago Board of Trade show the odds of the Fed cutting interest rates a quarter-percentage point to 4.25 percent on Dec. 11 are 96 percent, compared with 72 percent a month ago.

Spread Narrows

The National Association of Home Builders/Wells Fargo index of builder confidence held at 19 for a second month in November, the lowest since records began in 1985, the Washington-based association said yesterday.

The yield advantage of U.S. two-year Treasuries over comparable-maturity Japanese government debt shrank to 2.41 percentage points, the narrowest since October 2004, making U.S. assets less attractive to international investors.

Source - Bloomberg

Yen Heads for Second Weekly Gain on Stock Losses, Credit Risks

The yen headed for a second weekly gain versus the euro and dollar as concern over credit-market losses and falling stocks prompted investors to pare high- yielding assets funded by loans in Japan.

The yen has strengthened against the 16 most-actively traded currencies this week as traders pared so-called carry trades. Barclays Plc, the U.K.s third-largest bank, yesterday said it wrote down $2.7 billion of credit-related securities, and Wells Fargo & Co. said home-equity losses will remain elevated through 2008. U.S. Treasuries rallied, sending the yield on two-year notes to the lowest level since February 2005.

The yen has been strengthening a fair bit on that safe- haven play, said Jim Vrondas, manager of corporate business at online foreign-exchange dealer OzForex Ltd. in Sydney. The markets focus is on credit risk and weve seen scattered behavior during the week with big sharp drops in equity markets. Thats likely to continue in the short term.

The yen gained to 161.49 per euro at 8:45 a.m. in Tokyo from 162.48 late in New York on Nov. 9. The Japanese currency rose to 110.49 against the dollar from 110.69 last week. The euro bought $1.4619 from $1.4678.

Wells Fargos Chief Executive Officer John Stumpf yesterday said the current housing market is the worst since the Great Depression. Wells Fargo, based in San Francisco, is the second- largest U.S. mortgage lender.

The U.S. Dollar Index traded on ICE Futures U.S. in New York yesterday rose to 76.069, from 75.814 on Nov. 14. It has rebounded from 74.978 on Nov. 9, the weakest since the index began in 1973.

A Strong Dollar

U.S. Treasury Secretary Henry Paulson yesterday said the U.S. economy is going to continue to grow and its fundamental long-term strength is going to be reflected in our currency. A strong dollar is very much in our nations interest. He spoke to reporters traveling with him to Cape Town, South Africa, for the U.S.s Corporate Council on Africa conference.

Paulson, 61, is on a six-day trip to Africa that features a gathering of finance ministers and central bankers from the Group of 20 near Cape Town. The G-20 groups the largest developed countries, including the U.S. and Germany, with emerging markets such as China and India.

The Standard & Poors 500 Index fell 1.3 percent yesterday.

The yield on the two-year note fell 0.16 percentage point, and touched 3.33 percent, the lowest since February 2005.

The Swiss franc rose 0.4 percent this week to 1.6406 per euro.

Yen and Franc

The yen and the franc are used by investors to finance investments in markets with higher returns because interest rates in those countries are among the lowest in the industrialized world. Japans benchmark rate is 0.5 percent and Switzerlands is 2.75 percent. When risk aversion returned, investors bought the low-yielding yen and franc to pay back their loans, boosting demand for the currencies.

The pain from the credit market continues, said Michael Woolfolk, senior currency strategist at the Bank of New York Mellon, the worlds largest custodial bank with more than $20 trillion in assets. We are continuing to see the highly anticipated aftershocks of the earthquake from the financial crisis, which forced people to cut risky assets and return to the yen and the dollar.

TIC Data

Gains in the dollar may be limited by speculation a report today will show foreign purchases of U.S. securities were less than the amount needed to finance the trade deficit, raising concern there is a lack of demand for the U.S. currency.

A Treasury Department report will show foreigners purchased $71.5 billion of U.S. assets in September from net sales of a record $69.3 billion in August, according to a Bloomberg News survey. A report on Nov. 9 showed the U.S. trade deficit was $56.5 billion in September.

Even though figures show a net inflow of foreign purchases of U.S. assets, that could be yet another dollar- selling catalyst, said Tohru Sasaki, chief strategist at JPMorgan in Tokyo and a former chief currency trader at the Bank of Japan. Unless figures rise above $56.5 billion, this could raise concern over the U.S. current-account deficit.

The U.S. currency may fall to as low as 109.50 yen today, Sasaki said.

International investors sold a record amount of U.S. securities in August as soaring credit costs sparked an exodus from the stock market, the Treasury Department said in Washington on Oct. 16, when the dollar fell 0.4 percent against the yen. None of the dozen economists surveyed by Bloomberg News predicted the decline, the first since Russia defaulted in 1998.

Source - Bloomberg

Japanese Stocks May Drop for an Eighth Day on Yen Strength

Japanese stocks may drop for an eighth day, led by exporters and lenders, after the yen strengthened and an analyst said E*Trade Financial Corp. may go bankrupt, pointing to increased subprime losses in the U.S.

Mazda Motor Corp., which exports 80 percent of its domestic production, and Sumitomo Mitsui Financial Group Inc., the nation's No. 3 publicly traded bank, may pace the drop.

Shares of E*Trade, a U.S. online brokerage, lost more than half their value yesterday after a Citigroup Inc. analyst said there is a 15 percent chance the company will seek protection from creditors because of investments in asset-backed securities. The yen climbed to the highest since May 2006 against the dollar.

Mitsubishi Corp. may drop after the price of oil slid 1.8 percent to the lowest close in a week, while copper and gold prices also tumbled.

Investors are not going to be able to escape the negative impact on sentiment from what is happening in the U.S., said Terunobu Kinoshita, who helps manage $785 million at Fund Creation Co. in Tokyo. Just as some experts expect oil to keep rising, there is also the real possibility we may see oil prices fall to $60.

Nikkei 225 Stock Average futures expiring in December last traded in Chicago at 15,015, down from the close of 15,230 in Osaka and 15,165 in Singapore yesterday. The Bank of New York Japan ADR Index, which tracks the nation's American depositary receipts, slipped 0.2 percent.

Yen Strength

Yesterday, the Nikkei tumbled 2.5 percent to 15,197.09 and the Topix index dropped 2.5 percent to 1,456.40, the lowest in more than two years.

U.S.-traded receipts of Toyota Motor Corp., which gets as much as 70 percent of its operating profit from North America, lost 1.3 percent from the closing share price in Tokyo yesterday. Those of Sumitomo Mitsui slid 2.1 percent.

The yen recently strengthened to 109.50 against the dollar, from 110.34 at the close of market trading in Tokyo yesterday. Japan's currency rose to as high as 109.13, the strongest since May 2006. Against the euro, the yen advanced to as high as 158.71, a level not seen since Sept. 13. A stronger yen decreases the value of Japanese exporters' dollar-denominated sales when converted into local currency.

Prashant Bhatia, an analyst at Citigroup in New York, wrote in a report that there's a 15 percent chance E*Trade will seek protection from creditors after poor management put the viability of the franchise at risk. The company said last week it expects significant writedowns for losses on asset-backed securities.

E*Trade spokeswoman Pam Erickson described Bhatia's analysis as irresponsible and unfounded speculation.

Oil Tumbles

Mitsubishi Corp., Japan's largest trading company, generates the second-biggest proportion of its sales from selling crude and industrial fuel. Profits at Mitsui & Co., Japan's second-largest trading company, are the most sensitive to fluctuations in the price of oil.

Crude oil for December delivery fell 1.8 percent to $94.62 a barrel in the New York. The contract recently fell an additional 0.9 percent to $93.75 in after-hours trading. Copper futures fell 1.2 percent to a seven-month low, while gold plunged 3.2 percent, the biggest drop since Oct. 2006.

Tokyu Corp., an operator of railways, department stores and hotels, may advance. The company may say first half operating profit, or sales minus the cost of goods sold and administrative expenses, rose 12 percent to 42.5 billion yen ($388 million), the Nikkei newspaper reported. That would exceed the company's current forecast by 1 billion yen.

Isuzu Motors Ltd., Japan's third-biggest maker of commercial vehicles, may slip after the company reported a 26 percent drop in second-quarter operating profit as domestic sales slumped.

Source - Bloomberg

Commodities Tumble, Led by Metals, on Risk Concerns

Commodities tumbled, led by metals and energy, as investors sought to unwind high-risk bets on raw materials after prices climbed to records this year.

The UBS Bloomberg Constant Maturity Commodity Index fell as much as 2 percent after climbing to the highest ever on Nov. 7. Hedge-fund managers and other large speculators increased net- long positions, or wagers prices will rise, to a record last week in gold futures, Commodity Futures Trading Commission data showed. Speculative long positions in oil approached a record.

Investors are concerned global economies wont accelerate at the pace earlier this year and in 2006 amid turmoil in credit markets linked to the U.S. housing recession. The yen gained against 16 of the most-traded currencies as traders cut holdings of riskier assets bought with loans in Japan.

Were seeing a general shift against risk, said Leonard Kaplan, president of Prospector Asset Management in Evanston, Illinois. Gold, silver, and platinum are being hit because people are unwinding the yen trade.

Gold plunged the most in 13 months, and crude oil dropped as much as 2.9 percent. Copper and most agricultural commodities also declined.

Gold futures for December delivery fell $27, or 3.2 percent, to $807.70 an ounce on the Comex division of the New York Mercantile Exchange. The percentage drop was the biggest since Oct. 3, 2006.

Before today, gold rallied in 11 of the past 12 weeks, reaching a 27-year high of $848 on Nov. 7. The metal still has climbed 27 percent this year.

Risk Aversion

Risk aversion has returned to haunt the metals market, John Reade, an analyst at UBS AG in London, said in a report. Yen strength has coincided with metal-price weakness, signs that the foreign-exchange carry and long-metals positions are both seeing deleveraging.

Crude-oil futures for December delivery declined $1.70, or 1.8 percent, to $94.62 a barrel on the Nymex. The price reached a record $98.62 on Nov. 7.

Oil earlier touched $93.54 a barrel, and gold dropped as low as $798.80. The UBS Bloomberg CMCI dropped 19.90, or 1.6 percent, to $1,251.46 at 3:32 p.m. New York time.

Signs of slowing growth in the U.S. economy dented investor confidence that oil prices will reach $100 a barrel. Rising fuel costs may have slowed retail spending growth in the U.S., the worlds largest oil user, to a four-month low in October, according to a Bloomberg survey.

Wringing Out Inflation

Technically, we never got to $100, and the dollar strengthened significantly, said Frank McGhee, head metals trader at Integrated Brokerage Services LLC in Chicago. Youre seeing the market wringing out some of the inflation thats built up.

Rising fuel prices that businesses and consumers took in stride earlier this year may push the weakened U.S. economy into recession.

We are in a danger zone, says Nariman Behravesh, chief economist at Global Insight Inc. and a former Federal Reserve economist. It would take two shocks to bring the economy to its knees. We got one shock in the form of the credit crunch. Oil could be that second shock.

Copper tumbled to the lowest price in seven months after imports fell in China, the worlds largest user of the metal.

Chinas imports of copper and copper products fell to 204,242 metric tons in October, down 5.7 percent from 216,643 tons in September, the Beijing-based customs office said today. Before today, copper had fallen 15 percent since Oct. 1 on concern a slowing U.S. economy would reduce metals consumption.

Economy Is Biggest Worry

When Chinas copper imports come in lower, its bound to have a negative affect on the price, said Patrick Chidley, an analyst at Barnard Jacobs Mellet LLC in Stamford, Connecticut. The biggest worry now is the state of the economy and what that will mean for demand.

Copper futures for December delivery dropped 3.65 cents, or 1.2 percent, to $3.109 a pound on the Comex. Earlier, the metal touched $3.035, the lowest since March 29.

Falling prices for copper, which generally moves in line with economic expansion, are an indication that growth will slow and curb demand for commodities including oil, said Jonathan Barratt, managing director of Commodity Broking Services in Sydney.

Good Indicator

Copper is a good economic indicator, and with copper slumping at the moment, I just cant see that oil should be at these levels, Barratt said. Coppers actually led the way, and oil will follow down the track.

Silver futures for December delivery fell 78.3 cents, or 5 percent, to $14.762 an ounce on the Comex. The metal still is up 14 percent this year.

Platinum futures for January delivery tumbled $35.20, or 2.5 percent, to $1,390.80 on the Nymex. The price reached a record $1,498.80 on Nov. 7.

In carry trades, investors sell currencies of countries with lower borrowing costs and buy assets with higher interest rates or the prospect of greater yields. Japan has the lowest borrowing costs among industrialized nations at 0.5 percent.

Speculative long positions in gold futures outnumbered short positions by 202,125 contracts on the Comex in the week ended Nov. 6, CFTC data showed on Nov. 9. Net-long positions rose by 3,519 contracts, or 1.8 percent, from a week earlier.

Speculative long positions in oil futures on the Nymex outnumbered short positions by 105,816 contracts. Net-long positions rose by 22,696 contracts, or 27 percent, from a week earlier. Net-long positions reached a record 127,491 on July 31.

Source - Bloomberg

Dollar Rises Most Since July 2006 as Investors Reduce Risks

The dollar rose the most against the euro since July 2006 as credit-market losses pushed investors to reduce holdings of assets in higher-yielding currencies.

The currencies of Australia, South Africa, New Zealand and Brazil led the decline. Losses from the falling value of subprime mortgage assets may reach $300 billion to $400 billion worldwide, Deutsche Bank AG analysts said. The dollar touched a record low last week against its major trading partners.

The dollar is trading on a firm footing against the majors, said Matthew Perrier, a strategist with BMO Capital Markets in Toronto. The recent bout of risk aversion led the hedge fund community to take profits where they could be found to pay back losses in other areas. That has strengthened the dollar.

The dollar rose 0.9 percent against the euro to $1.4548, from $1.4678 last week. It fell to an all-time low of $1.4752 on Nov. 9. The U.S. currency has weakened 9.3 percent against the euro this year, extending its loss over the past five years to 30.4 percent.

Yen Rally

Risk aversion also pushed up the yen against all 16 most- actively traded currencies. The yen rose 0.8 percent to 109.86 per dollar and touched 109.13, the highest since May 2006. The Japanese currency also gained 1.6 percent to 159.83 per euro.

The Japanese currency rose as much as 5.1 percent versus the Australian dollar, 2.3 percent against the euro and 4.2 percent versus the South African rand as speculators retreated from carry trades.

Source - Bloomberg

Dollar hits record low vs euro, yen up on risk unwind

The dollar sank on Monday, hitting a record low versus the euro and other currencies after traders took a tumble in US stocks and the apparent indifference of Group of Seven finance officials to recent dollar weakness as a cue to dump the US currency.

Weakness in US stocks on Friday, when the Dow Jones industrial average and the Standard & Poor's 500 posted their worst daily percentage drops in two months, also pushed the dollar to a record low against a basket of currencies.

Tokyo traders on Monday picked up where dollar selling left off on Friday. At the same time, struggling equities discouraged demand for risky assets, boosting the yen as they triggered more unwinding in trades to sell the yen for high-yielding currencies.
The euro climbed to $1.4349 on electronic trading platform EBS after G7 officials ended a weekend meeting without offering verbal support for the beleaguered US currency, as expected, although they did urge China to speed up appreciation of the yuan.

The dollar fell more than 1 percent to 113.25 yen, hitting a six-week low, before pulling back to around 113.75 yen.

RISK AVERSION

The Japanese currency was bolstered by a 3.0 percent fall in the Nikkei stocks average, which along with other Asian equity markets followed US stocks lower.

"Stocks are down and volatility has shot up, so putting on yen carry trades is out of the question," said Seiichiro Muta, forex director at UBS Securities in Tokyo.

But the yen retreated from the day's highs, with some traders saying they had already factored in a sizable drop in the Nikkei, and that additional yen gains in Tokyo trade were unlikely barring a significant extension in Asian stock losses.

Market participants expect the dollar to stay weak on the growing view that the Federal Reserve may cut interest rates this month, as weak earnings among many US banks and corporations and a suffering housing market point to an economic slowdown.

Traders are bracing for US data on new and existing homes to be released later in the week, and some said that weak readings may push the dollar lower this week.

But they added that yen gains may be limited, as Japanese investors, particularly institutional players, were expected to step in to sell the yen to buy foreign assets as part of their investment plans for the second half of the financial year.

Japanese importers were also seen keen to sell the yen as it appreciates.

The yen may become vulnerable to selling in the near term, as some traders said that a Fed rate cut this month would likely boost equities, just as its decision to slash its fed funds rate by 50 basis points last month triggered a surge in US stocks, which may reheat demand for yen carry trades.

Japenese Stocks hit 4 weeks low and Nikkei was trading down 540 points

Source - Edited from Reuters

Dollar May Extend Drop After G-7 Fails to Address Record Slide

The dollar, trading at an all-time low against its major trading partners, may extend the decline after the Group of Seven failed to address the drop following a meeting of finance officials.

The policy makers, representing the U.S., U.K., Japan, Germany, Italy, France and Canada, stuck to language in prior statements by saying excess volatility' in currencies is undesirable and that currencies should trade in line with fundamentals. They also intensified calls for China to let its currency strengthen, during yesterday's gathering in Washington.

The dollar is going to be under pressure as the growth outlook weakens. Risk aversion is the focus now. The dollar dropped this week by the most in two months versus the yen, on concern the U.S. housing slump will rekindle a credit market sell-off.

The yen rose against the 16 most-actively traded currencies this week as a decline in global stocks prompted investors to sell assets funded by loans in Japan. A report next week is forecast to show existing home sales in the U.S. fell to the lowest since 2001 in September.

Sell the Dollar

The dollar fell 2.6 percent to 114.51 yen, from 117.61 on Oct. 12, the biggest weekly decline since the period ended Aug. 17. The U.S. currency weakened 0.9 percent to $1.4301 per euro. It touched an all-time low of $1.4319 yesterday.

The statement gives the market a green light to sell the dollar, said Brian Dolan, chief currency strategist at FOREX.com, a unit of the online currency trading firm Gain Capital in Bedminster, New Jersey, which has about $250 million of funds under management. With no comment from the G-7 about its weakness, the dollar could decline to $1.45 per euro in a month.

An Oct. 24 report from the National Association of Realtors may show sales of existing homes fell to an annualized 5.25 million last month, from 5.5 million in August, according to the median estimate of 64 economists surveyed by Bloomberg News.

The International Monetary Fund cut its forecast for 2008 U.S. economic growth to 1.9 percent from 2.8 percent on concern the sell-off in the credit markets will cut business and consumer spending.

Risk Aversion

Increased risk aversion caused investors to pare carry trades financed by yen. In such transactions, investors get funds in countries with lower borrowing costs and buy assets in nations with higher rates.

The trades have pushed the yen down 8.9 percent versus the euro and 12 percent against the Australian dollar in the last 12 months. The Japanese currency gained 1.8 percent to 163.79 versus the euro this week, the biggest increase since the period ended Aug. 17.

The Bank of Japan's benchmark borrowing cost is 0.5 percent, the lowest among major economies, and compares with the European Central Bank's 4 percent, the Federal Reserve's 4.75 percent and Australia's 6.5 percent.

Interest-rate futures traded on the Chicago Board of Trade show a 92 percent chance the Fed will cut its benchmark interest rate a quarter percentage point to 4.5 percent on Oct. 31. The odds were 32 percent a week ago. The chance of another rate cut in December to 4.25 percent is 74 percent, up from 15 percent on Oct. 12.

Source - Bloomberg

Yen May Rise Against Dollar on Credit Concerns, Risk Aversion

The yen may rise for a second straight day versus the dollar as comments from the biggest U.S. bank about deteriorating credit markets stoked risk aversion.

Citigroup Inc. yesterday said the financial industry is in for more losses from the housing market. A private report is forecast to show confidence among U.S. homebuilders fell to a record low. Federal Reserve Chairman Ben S. Bernanke speaks about the U.S. economy in New York.

``Risk aversion is going to be an ongoing theme,'' said Steven Butler, director of foreign exchange trading at Scotia Capital Inc. in Toronto. ``Even in pockets of calm, the market realizes things are going to get a whole lot worse in the U.S. before they get better.''

The yen traded at 117.39 per U.S. dollar and 166.75 versus the euro at 6 a.m. in Tokyo. The euro bought $1.4205. Japan's currency gained 0.2 percent versus the dollar yesterday.

The yen yesterday advanced 0.9 percent versus the Australian dollar and Brazilian real after Citigroup Inc. said third-quarter earnings fell 57 percent. Chief Financial Officer Gary Crittenden said late payments on home loans may worsen in the fourth quarter.

``An air of skepticism is re-emerging around the credit problems,'' said Alan Ruskin, head of international currency strategy at RBS Greenwich Capital Markets in Greenwich, Connecticut.

U.S. Stock Indexes

The Standard & Poor's 500 Index and the Dow Jones Industrial Average fell 0.8 percent yesterday. The indexes lost more than 3 percent in June and July as credit markets were roiled by the worst recession in the U.S. housing market in 16 years.

The National Association of Home Builders/Wells Fargo index of builder confidence may drop to a record low of 19 this month, according to the median estimate of 36 economists surveyed by Bloomberg News. The data will be released at 1 p.m. Washington time.

Bernanke may speak about the resilience of the U.S. economy in the face of the housing slump at his address to the Economic Club of New York at 7 p.m. New York time on Oct. 15.

The Bank of Japan yesterday cut its economic assessment in three of the country's nine regions yesterday, making it more difficult to continue the policy of gradual interest-rate increases. Japan's 0.5 percent benchmark interest rate is the lowest among major economies and compares with 11.25 percent in Brazil and 6.5 percent in Australia.

Source - Bloomberg