Euro Climbs Against Yen

The euro rose to the strongest level this year against the Japanese yen and traded near a two-week high against the dollar as traders increased bets the region's central bank will raise rates as early as next month.

The euro has appreciated 2.6 percent versus the yen and 2.4 percent against the dollar since June 5, when ECB President Jean-Claude Trichet signaled interest rates may rise July 3 to quell inflation. The yen fell against every major counterpart today after a government report showed Japan's longest postwar expansion may be over.

The euro rose to 166.65 yen as of 7:23 a.m. in New York, from 165.54 last week. It strengthened to $1.5802, from $1.5778. The yen dropped to 105.70 versus the dollar, from 104.93.

An interest-rate increase next month is ``possible,'' Trichet said in Frankfurt last week. It was a message that the markets have understood ``quite well,'' ECB council member Nout Wellink, who also heads the Dutch central bank, was quoted as saying in an interview with Market News International.

The ECB will lift the main refinancing rate twice this year as inflation exceeds the central bank's target, taking it to 4.5 percent by year-end, according to interest-rate futures trading. Inflation is running at the fastest pace in 16 years.

Japan's economy may be reaching a ``turning point,'' the Cabinet Office said today after releasing figures that showed the coincident index, a measure of current economic activity, fell to 101.7 in April from a revised 102.4 the previous month. The government hasn't described the world's second-largest economy in such terms since the most recent recession in 2001.

Euro Climbs Against Yen, Bloomberg
6/9/2008 6:16:01 AM