Yen Rises as G-20 Lacks Specifics to Boost Global Economy

Nov. 17 (Bloomberg) — The yen rose for a second day against the euro after the Group of 20 nations delayed agreeing on specific measures to combat a global crisis, prompting investors to pare holdings of higher-yielding assets funded in Japan.

The yen gained against the U.S., Australian and New Zealand dollars before reports this week economists estimate will show U.S. manufacturing and homebuilding sank deeper into a recession. The greenback rose against the euro asecond day on speculation investors will avoid the risk of so-called carry trades.

“Disappointment over the G-20 meeting will spur yen gains,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “The global economy will be in trouble for a long time, so investors won’t be willing to take on risk.”

The yen strengthened to 121.26 per euro as of 7:34 a.m. in Tokyo from 122.39 late in New York on Nov. 14. It rose to 96.57 per dollar from 97.14. The euro fell to $1.2557 from $1.2605. The pound was at $1.4711 from $1.4740. The yen may rise to 90.93 per dollar this week, Soma said.

G-20

The G-20 urged a “broader policy response” and set a March deadline for recommendations on improving regulations at a summit that ended in Washington on Nov. 15. Leaders of G-20 countries met in Washington as a seizure in credit markets and losses of $958 billion on securities tied to U.S. mortgages pushes the world’s largest economies into a recession.

Japan’s gross domestic product was unchanged in the three months ended Sept. 30, according to the median estimate of economists surveyed by Bloomberg News before the government report at 8:50 a.m. in Tokyo today.

Gross domestic product in the 15 euro nations shrank 0.2 percent in the third quarter after contracting by the same amount in the previous three-month period, data showed on Nov. 14. Two consecutive quarters of contraction mark the first recession since the single currency was introduced in 1999.

In carry trades, investors purchase of higher-yielding assets funded with currencies with lower rates. The yen rose 2 percent against the euro last week and advanced by 5.2 percent against the Australian dollar and 8 percent versus the New Zealand dollar.

Benchmark interest rates are 0.3 percent in Japan, 1 percent in the U.S., 3.25 percent in Europe, 5.25 percent in Australia and 6.5 percent in New Zealand.

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