Japan’s currency headed for its first quarterly gain versus the euro in six quarters as a decline in Asian equity markets encouraged traders to abandon so-called carry trades and buy back the yen to pay loans. U.K. Prime Minister Tony Blair stepped up pressure on Iran to release 15 naval personnel, pushing oil prices to a six-month high and causing a drop in emerging market currencies including Brazil’s real.
“Investors may take funds out of risky assets such as yen carry trades because of the Iran situation,” said Yuji Saito, a senior currency dealer at Societe General SA in Tokyo. “This is a factor for buying the yen” to 116.40 against the dollar and 155.20 per euro today, he said.
The yen traded at 116.88 against the dollar at 10:30 a.m. in Tokyo from 116.86 late in New York yesterday. It reached 116.39 yesterday, the highest since March 19.
Asian stocks declined, sending both the Morgan Stanley Capital Asia-Pacific index and the Nikkei 225 Stock Average down for a third day.
The Bank of Japan’s key overnight lending rate is 0.50 percent, the lowest among major economies. The Federal Reserve’s target overnight lending rate is 5.25 percent, the European Central Bank’s benchmark rate is 3.75 percent and Australia’s rate is 6.25 percent.
Earlier Declines
Japan’s currency had weakened after a government report today showed the nation’s retail sales unexpectedly fell for a fourth month in February.
“The data show consumer spending is still weak, undermining the BOJ’s case for raising interest rates,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The yen is being sold” to 117.50 against the dollar and 156.00 per euro today, he said.
Sales at retail outlets dropped 0.2 percent from a year earlier, the trade ministry said today in Tokyo. The median estimate of 24 economists surveyed by Bloomberg News was for a 0.1 percent increase. Sales of fuel, including heating oil, fell 5.5 percent. Private consumption accounts for more than half of Japan’s economy.
