Yen Rebounds from Seven-Month Low

The yen rebounded from a seven-month low against the dollar on speculation Japanese exporters took advantage of its decline to repatriate overseas earnings at a more favorable rate than they initially assumed.

Large Japanese manufacturers expect the yen to average 102.74 per dollar in the fiscal year started April 1, according to the Bank of Japan's quarterly Tankan business sentiment survey released on July 1.

The yen weakened to the lowest level since January against the dollar on Wendesday after Japan's government said the economy is ``deteriorating,'' acknowledging for the first time that the country's longest postwar expansion has probably ended.

The currency also felt against the Swedish krona, South Korean won and Norwegian krone on speculation the Bank of Japan will keep borrowing costs at 0.5 percent, the lowest among major economies. The dollar rose to a seven-week high against the euro as this month's slide in crude oil extended to 20 percent from the record high reached in July.

Japan's benchmark interest rate compares with 5.75 percent in Norway, 4.5 percent in Sweden and 5 percent in South Korea.

The Japanese economy, the world's second-largest, shrank an annualized 2.3 percent in the three months ended June 30, according to the median estimate of economists surveyed by Bloomberg News before the Cabinet Office report on Aug. 13. The economy expanded at an average annualized pace of about 2.2 percent during the six years of growth that began in February 2002.

Yen Rebounds from Seven-Month Low, Bloomberg
8/6/2008 7:26:12 PM