Yen drops on new carry trade popularity

Story link: Yen drops on new carry trade popularity

The yen weakened Tuesday after the Bank of Japan held interest rates there at 0.5 percent and the Bank’s governor did not hint at when rates might go higher.

In addition, investor willingness to return to risky carry trades hurt the Japanese currency, as well as the Swiss franc.

In afternoon trade in New York, the yen traded at ¥110.7150 to the US dollar, while it stood at ¥161.5164 to the euro and at ¥229.0913 to the pound.

Among the currencies that gained most versus the yen was the Australian dollar, which stood at ¥98.6692 versus the Japanese currency.

The Swiss franc, meanwhile, saw its worst one-day decline in two weeks in relation to the euro, while it dropped 1.5 percent versus the Australian dollar and by 1.6 percent against the South African rand.

Tuesday afternoon in New York the euro was worth SFr1.6442.

Sterling strengthened after a two-day, 2.6 percent decline as inflation jumped above the 2 percent target set by the Bank of England last month, lessening the chances that the Bank will cut interest rates soon.

Still, analysts believe that rate cuts are coming next year, as UBS projected Monday that the Bank will send rates lower three times during 2008.

A pound was worth $2.0692 in afternoon trade, while it bought €1.4184, A$2.3218 and SFr2.3321.