Yen, Dollar Advance on CIT Bankruptcy Concern, Jakarta Blasts

July 17 The yen and the dollar rose as speculation CIT Group Inc. will file for bankruptcy and blasts in Indonesia spurred demand for the currencies as a refuge.
The yen climbed more than 1 percent against the South African rand and the Swedish krona after New-York based CIT, the lender facing insolvency because it failed to obtain guarantees for its bonds, said it’s trying to secure financing. Indonesia’s rupiah fell the most in more than three weeks against the dollar after explosions tore through two hotels in Jakarta.
“In the short term, the Indonesian and CIT concerns will cause some knee-jerk risk aversion,” said Derek Halpenny, European head of global currency research at Bank of Tokyo- Mitsubishi UFJ Ltd. in London. “It’s an obvious first reaction.”
The yen strengthened to 131.99 per euro as of 9:07 a.m. in London, from 132.89 yesterday in New York, and appreciated to 93.70 per dollar, from 93.93. The U.S. currency rose to .4086 per euro, from .4148. The Indonesian rupiah weakened 0.5 percent to 10,175 per dollar, after dropping as much as 1 percent, the most since June 23.
Japan’s new top currency official said today the government would consider stepping into the foreign-exchange market only if abrupt yen moves hurt the economy.
“We’ll make judgments based on whether excessive movements in the currency market will adversely affect the economy,” Rintaro Tamaki, vice finance minister for international affairs, said in a group interview in Tokyo today.
The yen appreciated against all 16 most-actively traded currencies in the past month, while it’s weaker against the same group this year.
CIT Funds
Futures on the Standard & Poor’s 500 Index declined 0.2 percent, signaling U.S. stocks may open lower today. The Dollar Index, which the ICE uses to track the currency against those of six major U.S. trading partners such as the euro and the yen, rose 0.4 percent to 79.528.
CIT may need as much as billion to avoid bankruptcy, CreditSights Inc. analysts said yesterday. CIT executives are seeking billion to billion in financing from the private sector, the Wall Street Journal reported, citing unidentified people familiar with the situation.
The yen gained for a second day against the euro and the British pound as bombs tore through the Ritz Carlton and the JW Marriott hotels in the Jakarta, killing at least nine people and injuring 42 others, police said.
Jakarta Explosions
The blasts in the two hotels were caused by “high explosives,” said Crisnanda, a spokesman for the police. A New Zealander was among those killed, the government in Wellington said.
“The explosions in Indonesia added to the buying of the yen on risk aversion,” said Takao Yahata, senior manager of foreign exchange and financial-products trading in Tokyo at Mitsubishi UFJ Trust and Banking Corp., a unit of Japan’s largest publicly traded lender by assets.
The yen also gained against the dollar on speculation Japanese exporters bought the currency to convert their foreign- exchange earnings before the three-day holiday. Monday is a national holiday in Japan.
“Yen buying by Japanese investors, including exporters, picked up as the yen fell back toward 94 per dollar and beyond,” said Kosei Fujita, a foreign currency dealer in Tokyo at SBI Liquidity Markets Co., a unit of SBI Holdings Inc.
Japanese companies forecast the yen would average 94.85 per dollar in the 12 months to March 2010, according to the Bank of Japan’s quarterly Tankan survey on corporate sentiment and business plans released on July 1.
Dollar Index
The Dollar Index also rose for the first time in three days after U.S. Treasury Secretary Timothy Geithner repeated that the Obama administration is committed to a “strong” dollar and curbing record budget deficits to achieve that objective.
Geithner said the dollar’s role in international finance places “special responsibilities” on the U.S. to sustain confidence in its financial system, according to an Internet chat with Les Echos newspaper yesterday.
“This was similar to well-timed comments by top U.S. officials to hold up confidence whenever U.S. stocks looked fragile,” Philip Wee, senior currency economist in Singapore at DBS Group Holdings Ltd., wrote in a research note today. “If so, U.S. officials may find further dollar weakness from here a threat to their efforts to dig the economy out of recession.”
The dollar and the yen still headed for their biggest weekly loss in two months against the euro as stocks advanced worldwide, reducing demand for the U.S. and Japanese currencies as a haven from the global recession.
Emerging Markets
“The currencies of emerging markets and resource-rich nations fare well against the dollar and the yen when stocks are on the rising trend, reflecting optimism about the economy,” said Yuji Kameoka, a strategist in Tokyo at Daiwa Institute of Research Ltd., a unit of Japan’s second-largest brokerage group. “The recent retreat in optimism and the re-emergence of risk- aversion may be a blip.”
The Nikkei 225 Stock Average rose 0.6 percent and the MSCI World Index climbed 0.3 percent, having gained 6.7 percent this week, the most since March.
The Canadian dollar appreciated the most of the 16 major currencies against the yen this week, climbing 5.4 percent to 83.80 yen. The Australian dollar advanced 4.1 percent over the past five days to 75 yen.

Source | Forex News | http://forexnews-4all.blogspot.com/2009/07/yen-dollar-advance-on-cit-bankruptcy.html

Yen, Dollar Rise as CIT Bankruptcy Concern Spurs Safety Demand

The yen and the dollar strengthened for a second day against the euro on renewed concern U.S. commercial lender CIT Group Inc. will file for bankruptcy, boosting demand for safer assets.
The yen rose against 15 out of 16 major currencies after CIT said it expected to post a loss of more than .5 billion and its “existing liquidity” is not enough to repay maturing notes. The pound weakened after an industry group said the U.K. house-price slump will persist, backing the case for the central bank to keep borrowing costs low. The Australian and New Zealand dollars declined after Federal Reserve Chairman Ben S. Bernanke said dangers to the U.S. economy remain.
“Worries over a possible insolvency of CIT appear to be returning,” said Akifumi Uchida, a Tokyo-based deputy general manager of the marketing unit at Sumitomo Trust & Banking Co., Japan’s fifth-largest bank. “This is a minus for sentiment and may cause buying of the yen versus the dollar and the dollar against European currencies.”
The yen strengthened to 133.01 per euro as of 1:14 p.m. in Tokyo from 133.36 in New York yesterday, when it gained 0.5 percent. Japan’s currency climbed to 93.68 versus the dollar from 93.73. The dollar rose to .4197 per euro from .4226.
The pound dropped to .6407 from .6459. Australia’s dollar fell 0.3 percent to 76.48 yen and slipped 0.3 percent to 81.61 U.S. cents. New Zealand’s dollar lost 0.3 percent to 65.57 cents and slid 0.4 percent to 61.44 yen.
Bernanke Comments
The Australian and New Zealand dollars dropped for the first time in three days against the greenback after Bernanke said yesterday financial markets remained “stressed,” encouraging demand for safer assets.
Household spending is an “important” risk to the outlook because of continued job losses and declines in home values, Bernanke said on the first day of a two-day congressional testimony in Washington.
“A bit of risk aversion is creeping back into the market,” said Thomas Harr, a currency strategist at Standard Chartered Plc in Singapore. Bernanke “was more dovish on the economy and on the economic recovery and a little bit of risk has been taken off the table which is weakening the Aussie.”
The pound dropped against 13 of the 16 major currencies after the National Institute of Economic and Social Research said today that home values will resume their decline because recent gains were driven by a lack of available homes.
The institute also predicted gross domestic product will keep falling until the final quarter of this year. It forecast GDP will shrink 0.4 percent in the second quarter. The median estimate of 32 economists in a Bloomberg News survey is for a 0.3 percent drop. The Office for National Statistics will release the data on July 24.
‘Not Good News’
“All of this is not good news for Britain,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “This is leading to selling of the pound.”
The pound also fell after the Telegraph reported that Barclays Plc will need another 12.8 billion pounds ( billion) and Royal Bank of Scotland Group Plc will require an additional 8.5 billion pounds to expand under new regulatory rules. The U.K. newspaper cited Carla Antunes da Silva, a banking analyst at JPMorgan Securities Ltd., as saying. She said HSBC Holdings Plc had a 3 billion pound shortfall.
“The Telegraph story came as a reminder that the financial crisis is not fully over,” said Shuzo Kakuta, senior foreign exchange advisor at Tokyo Tomin Bank Ltd. “This kind of topic is positive for the yen both against the dollar and cross- currencies” such as the Australian dollar.
Equities Gain
Gains in the Japanese and U.S. currencies were tempered on speculation an advance in Asian stocks will spur investors to increase holdings of higher-yielding assets. The Nikkei 225 Stock Average rose 1 percent and the MSCI Asia-Pacific Index of regional shares climbed 0.5 percent.
“Rising equities are likely to lead to selling of the yen,” said Masanobu Ishikawa, general manager of foreign exchange at Tokyo Forex & Ueda Harlow Ltd., Japan’s largest currency broker. “The stock markets are considered to be a barometer of risk appetite.”
Australia’s dollar may advance toward a 10-month high after the currency climbed above a “pivotal resistance” point at 81.55 U.S. cents, BNP Paribas SA said, citing trading patterns.
The so-called Aussie dollar has slipped 1.2 percent from this year’s high of 82.63 U.S. cents on June 3 as investors sold higher-yielding assets on concern that the second-quarter corporate earnings season would disappoint. The break above 81.55 cents suggests the recent “corrective pullback” is over, Andrew Chaveriat, a technical strategist at BNP Paribas in New York, wrote in a note to clients yesterday.
“Aussie should make a new cycle high,” Chaveriat wrote. Weekly momentum is expected to turn bullish, which “would increase the odds of hitting 83.80-85.20 cents.”

Source | Forex News | http://forexnews-4all.blogspot.com/2009/07/yen-dollar-rise-as-cit-bankruptcy.html