The Yen drops sharply as stocks rise and carry trades hit high

The Japanese yen declined against the dollar and the euro as stocks rallied on speculation the global financial crisis is easing, damping demand for the currency as a haven. The yen fell against all of the 16 most-actively traded currencies. “There’s a sense the global turmoil is easing, which is improving risk-taking appetite,” said Hideki Amikura, deputy general manager of foreign exchange in Tokyo at Nomura Trust and Banking Co., a unit of Japan’s largest brokerage. “This means the yen will likely weaken and currencies such as the euro and the pound will probably strengthen” in coming days, he said. Federal Reserve Chairman Ben S. Bernanke said on April 3 programs to unfreeze credit markets “are having the intended effect.” The USD/JPY is currently trading at 101.35 as of 9:00am, GMT.

Sterling jumped against major currencies on Friday, hitting a seven-week peak against the dollar after a higher-than-expected reading in services data. The pound extended its gains, undeterred by the dollar's rise against other major currencies, after the U.S. jobs report showed employers slashed 663,000 jobs in March, compared with forecasts of a 650,000 drop. Sterling has now taken back its losses after the Bank of England adopted in March its so-called "quantitative easing" policy of buying assets to boost liquidity, as its main lending rate stands at a record 0.5 percent. The euro initially rose on Thursday after the ECB cut interest rates by a smaller-than-expected 25 basis points to 1.25 percent. But gains were tempered after ECB President Jean-Claude Trichet signalled there may be another rate cut next month as well as a decision on non-standard measures. The GBP/USD is currently trading at $1.4930 as of 9:15am, GMT.

The Australian dollar may gain as much as 20 percent in the next six months against New Zealand’s currency as Australia’s central bank may not lower interest rates as much as its smaller neighbor, RBC Capital Markets said. Governor Glenn Stevens will leave interest rates on hold at 3.25 percent when the Reserve Bank of Australia meets tomorrow, according to 12 of 23 economist surveyed by Bloomberg News. The Reserve Bank of New Zealand’s Alan Bollard, in contrast, said April 1 long-term rates had risen too high and were “unwarranted and inconsistent” with the policy outlook. Gains in the Australian dollar may be limited as traders today bet the RBA will lower its benchmark rate by at least 25 basis points, with a 37 percent chance of a bigger reduction, according to a Credit Suisse index based on swaps trading. The AUD/USD is currently trading at 0.7160 as of 9:20am, GMT.

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