The Yen drops as investors seek riskier assets due to the rise in stocks

The JPY fell against the euro and the South African rand as global stocks advanced on speculation that corporate earnings will increase, fanning appetite for higher yielding assets. The Canadian dollar rose to the strongest level in more than a year against its U.S. counterpart as crude oil, Canada’s biggest export, climbed to a seven-week high. The pound slipped to a six-month low against the euro after the Center for Economics and Business Research said interest Rates won’t rise until 2011. “This is still a carry-trade environment,” said Amelia Bourdeau, a currency strategist in Stamford, Connecticut, at UBS AG, referring to the practice of buying higher-yielding assets with funds borrowed from low-interest-rate countries. “The low rates in the Group of Three nations provide the backdrop for risk-seeking. The earnings will be the key events to dictate the risk sentiment.” The USD/JPY is currently trading at 89.90 as of 21:25PM, London Time.

Sterling fell to a six-month low against a basket of currencies on Monday as British government plans to raise billions of pounds through asset sales reminded investors of how bleak the outlook is for UK public finances. A report from consultancy Centre for Economics and Business Research, meanwhile, said interest rates could stay at the record low of 0.5 percent until 2011 and reach only 2 percent by 2014, highlighting the pound's relatively dim appeal from a yield perspective. Prime Minister Gordon Brown outlined plans to sell 3 billion pounds of assets, part of a broader programme to raise 16 billion pounds and help reduce the ballooning budget deficit. The GBP/USD is currently trading at $1.5805 as of 21:30PM, London Time.

Investors should sell the euro against the Canadian dollar, betting that the common European currency will drop at least to C$1.43, JP Morgan Chase & Co. said, citing technical trading patterns. The currency pair has created a “head-and-shoulders” pattern with so-called neckline support at C$1.5307, Anthonj wrote. A head-and-shoulders formation comprises three consecutive peaks on a chart, and a neckline is the base of the pattern. Support is an area where buy orders may be clustered. A drop below C$1.5307 “would most likely act as the trigger that we’d follow projecting a straight decline to C$1.4285,” he wrote. The currency may drop as far as C$1.3290, he added, a level last reached in November 2007 that was the weakest since July 2001. The EUR/CAD is currently trading at 1.5295 as of 21:28PM, London Time.

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