23 Jun 2009
June 23 (Bloomberg) -- The yen strengthened to a three-week high against the euro as Asian stocks slumped on concern the global recession will be prolonged, spurring demand for the relative safety of Japan's currency.The yen advanced against all 16 major currencies before a French report today that economists say will show consumer spending slowed in Europe's third-largest economy last month. Japan's currency also gained against the dollar before a U.S. report tomorrow that may show durable-goods orders declined in May. South Korea's won fell to a seven-week low on speculation tensions with North Korea will escalate.
"Worries that the ‘green shoots' of the global recovery are unlikely to be sustainable may make investors risk averse," said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co., a unit of Japan's largest brokerage. "This will probably lead to yen appreciation."
The yen advanced to 131.98 per euro as of 11:23 a.m. in Tokyo from 132.93 yesterday in New York. It earlier reached 131.84, the strongest level since May 28. The yen climbed to 95.28 per dollar from 95.87, after rising to 95.25, the highest since June 1. The dollar rose to $1.3850 per euro from $1.3865.
Stocks Decline
The Nikkei 225 Stock Average fell 3.1 percent and the MSCI Asia Pacific Index of regional shares dropped 2.6 percent. The World Bank yesterday predicted the global economy will contract 2.9 percent this year, compared with a previous forecast of a 1.7 percent decline.
The yen typically strengthens in times of financial turmoil as Japan's trade surplus makes the currency attractive as it means the nation does not have to rely on overseas lenders.
Growth in French consumer spending slowed to 0.2 percent in May from a 0.7 percent increase in April, according to a Bloomberg News survey of economists before the national statistics office releases the report today in Paris.
The Australian dollar fell for a second day against the yen after the price of gold, the nation's third most valuable commodity export, declined. The Norwegian krone weakened after crude oil yesterday slipped to a two-week low.
"Commodity currencies, the euro and other European currencies, which benefited from the recent risk rally, will adjust," said Masafumi Yamamoto, head of foreign-exchange strategy for Japan at Royal Bank of Scotland PLC in Tokyo. "That means they will retreat against the yen and dollar."
Australia's dollar weakened 0.7 percent to 74.81 yen from 75.32 yen yesterday, and Norway's krone declined 1 percent to 14.48 yen from 14.63 yen.
Won Falls
The won declined for a fifth day as overseas investors sold more of the nation's shares than they bought for the first time in three days. North Korea will conduct military firing exercises off its east coast between June 25 and July 10, Jiji Press reported, citing an e-mail sent to Japan's Coast Guard.
"Offshore players resumed buying dollars in the face of escalating tensions relating to the North," said Roh Sang Chil, a currency dealer at Kookmin Bank in Seoul, the nation's biggest lender. "Those who bought the won around 1,250 turned to selling on a global strengthening of the dollar."
The won slipped 0.9 percent to 1,286.32 per dollar. It earlier touched 1,287.87, the lowest since May 6. The Kospi stock index fell 2.7 percent.
