March 30 (Bloomberg) -- The yen and the dollar rose against
the euro after an Obama administration official said bankruptcy
may be the best option for General Motors Corp. and Chrysler LLC,
spurring investors to seek the shelter of the two currencies.
The yen extended gains versus all 16 major currencies as
Asian stocks ended a five-day rally on concern the global
recession will lead to further losses in the financial industry.
The greenback advanced for a third day versus the euro on
speculation the European Central Bank will cut interest rates
this week to the least since the European currency was
introduced in 1999.
“There is no doubt that this report on the U.S. carmakers
is fueling risk aversion,” said Yuji Saito, head of the
foreign-exchange group in Tokyo at Societe Generale SA, France’s
third-largest bank. “The bias is for the yen, followed by the
dollar, to be bought.”
The yen advanced to 128.25 per euro as of 6:58 a.m. in
London from 130.04 in New York last week. The dollar rose to
$1.3214 per euro from $1.3287. The greenback climbed to $1.4206
per British pound from $1.4320. Japan’s currency gained to 96.96
per dollar from 97.86.
The Dollar Index rose for a third day after the Obama
administration official, who declined to be identified, said the
automakers must overhaul their recovery plans with deeper
concessions to justify further aid from U.S. taxpayers.
Seeking Aid
GM asked for as much as $16.6 billion in additional
assistance after receiving $13.4 billion since December.
Chrysler requested $5 billion after getting $4 billion. Both had
been asked to show progress by the end of this month in matters
such as GM’s need to cut its unsecured debt by two-thirds.
The Dollar Index, which the ICE uses to track the greenback
against the euro, yen, pound, Canadian dollar, Swiss franc and
Swedish krona, climbed 0.5 percent to 85.538 after reaching
85.608, the highest level since March 18.
The yen strengthened as the MSCI Asia Pacific Index slumped
3.6 percent, its biggest loss in more than two months. Futures
on the Standard & Poor’s 500 Index dropped 1.9 percent.
“The tumble in equities is sparking risk aversion among
investors,” said Toshihiko Sakai, head of trading for foreign
exchange and financial products in Tokyo at Mitsubishi UFJ Trust
& Banking Corp., a unit of Japan’s biggest bank. “The yen and
the dollar are likely to be bought.”
ECB Rate Bets
The euro weakened for a second day versus the yen on
expectations ECB President Jean-Claude Trichet will signal
further interest rate-cuts when he speaks before the Committee
on Economic and Monetary Affairs today. Trichet speaks at 4:30
p.m. in Brussels.
The central bank is likely to reduce interest rates to 1
percent at its meeting on April 2, according to a Bloomberg News
survey of economists.
The 16-nation currency declined amid speculation leaders
from the Group of 20 nations, who meet on April 2 in London,
will fail to agree on fiscal measures to counter the slump.
European officials earlier this month said they had spent enough
money to combat the financial crisis and don’t want to blow out
their budgets.
“The euro will weaken against the U.S. dollar given that
the market expects the ECB to cut interest rates this week,”
said Susumu Kato, chief economist in Tokyo at Calyon Securities,
the investment banking unit of Credit Agricole SA. “Also
European leaders, except for the U.K., will not want to do much
more at the G-20 meeting, so this will also be very negative for
the euro.”
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