Yen Falls on Concern Investors Will Seek Higher Yields Overseas

By Theresa Barraclough

March 16 (Bloomberg) -- The yen fell for a third day against the dollar and the euro on speculation a Bank of Japan plan to buy government debt will spur investors to seek higher- yielding assets overseas.

The Japanese currency extended this month’s decline before the central bank starts a two-day meeting tomorrow at which it may announce plans to repurchase government securities to keep yields low. The euro weakened against 10 of the 16 major currencies on speculation the reluctance of European nations to boost spending will extend the region’s recession and add pressure for lower interest rates.

“The yen is likely to be under weakening pressure amid speculation longer-dated yields will decline,” widening the gap between returns on Japanese government securities and those of other states and reducing the currency’s appeal, said Hideki Hayashi, an economist at Shinko Securities Co. in Tokyo.

The yen weakened to 98.18 versus the dollar as of 6:46 a.m. in London from 97.95 late in New York last week. It reached 99.68 on March 5, the lowest level since Nov. 5. Japan’s currency declined to 126.89 per euro from 126.65. The European currency traded at $1.2925 from $1.2928.

The South Korean won strengthened 3 percent to 1,440 against the dollar, and climbed 3.5 percent to 14.6309 versus the yen. The British pound climbed to $1.4049 from $1.4002 late last week.

The difference in yield between 10-year U.S. and Japanese debt was at 1.58 percentage points today, near the 1.73 percentage points reached on Feb. 27, which was the widest since November, according to data compiled by Bloomberg. The spread between 10-year Australian and Japanese debt widened to 2.98 percentage points today. Read More...>