Yen Falls versus Euro

The yen fell to near the lowest level this year against the euro after a rally in stocks gave investors confidence to buy higher-yielding currencies with funds from Japan.

The currency also traded near a seven-week low against the dollar and slid versus the New Zealand dollar, a favorite for so-called carry trades, as Japan's Nikkei 225 Stock Average futures advanced in Chicago. U.S. stocks posted the biggest weekly gain in almost three months after earnings of banks exceeded estimates.

The yen declined to 164.39 per euro at 8:10 a.m. in Tokyo, from 163.96 in New York on April 18 when it reached 164.68, the lowest level since Dec. 31. The Japanese currency dropped to 104.02 per dollar from 103.67. The yen weakened to 82.27 per New Zealand dollar from 81.90 and 208.01 per British pound from 207.13. The dollar was little changed at $1.5805 per euro.

In carry trades, investors get funds in a country with low borrowing costs and invest in one with higher interest rates, earning the spread. The risk is that currency fluctuations erase the profit. Japan's benchmark rate of 0.5 percent compares with 7.25 percent in Australia and 8.25 percent in New Zealand.

Yen Falls versus Euro, Bloomberg
4/20/2008 5:49:58 PM