Yen, Swiss franc advance on credit concerns

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The Japanese yen and the Swiss franc were both stronger Monday on another retreat from risky carry trades, in which purchases of higher-yielding currencies are financed with lower-yielding currencies such as the yen and the franc, as concerns about losses due to the credit crisis continue.

These worries were fed by the possibility that insurer American International Group (NYSE: AIG) could take as much as $2.41 billion in writedowns related to mortgages in the third quarter while Columbian Bank, based in Topeka, Kansas, was closed by state officials and the Federal Deposit Insurance Corporation last Friday.

At nearly noon in New York the yen traded at ¥109.4050 to the US dollar and at ¥161.7223 to the euro while the Swiss franc traded at SFr1.6189 to the euro and at SFr1.0952 to the greenback.

The Australian and New Zealand dollars, meanwhile, were weaker versus both the US dollar and the yen on the possibility that declines in prices for commodities, which make up a majority of both nations’ exports, could hurt economies in the region.

The Australian dollar was worth 86.65 cents US and ¥94.8049 in late morning trade in New York, while the New Zealand dollar traded at 70.77 cents US and at ¥77.428.

The South African rand was weaker on the retreat from interest in higher-yielding currencies and ahead of a report that will likely show that inflation there remained above the South African Reserve Bank’s 6 percent target for the 15th month in a row, with estimates that inflation was at 12.9 percent in July.

The rand traded at $7.7325 to the US dollar, at R11.434 to the euro, and at R7.0655 to the Swiss franc.

The greenback managed to gain on the euro, to $1.4782 to the shared currency, on a report that existing home sales in the United States were up more than anticipated in July.