Yen, Dollar Rise After CIT Says Unlikely to Obtain Federal Aid

 The yen and the dollar strengthened against the euro after CIT Group Inc. said it probably won’t receive a federal bailout, spurring speculation the U.S. commercial lender will file for bankruptcy.

The Japanese and U.S. currencies both advanced against at least 13 of their 16 major counterparts after a U.S. report showed foreclosure filings increased to a record, boosting demand for safer assets. The New Zealand dollar fell the most in a week after Fitch Ratings cut the outlook for the nation’s long-term credit rating. The Dollar Index climbed from near a five-week low after charts showed its 1.4 percent decline in the past month was excessive.

“The commercial lender may go bankrupt,” 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 largest bank. “The government may perceive there’s not much need to provide financial aid. This may cause buying of the yen and the dollar as safe-haven currencies.”

The yen advanced to 132.28 per euro as of 7:46 a.m. in London from 132.95 in New York yesterday, when it weakened to 133.40, the lowest level since July 7. The dollar rose to $1.4077 per euro from $1.4107. Japan’s currency climbed to 93.96 per dollar from 94.23.

New Zealand’s dollar declined 1.1 percent to 64.16 U.S. cents, the biggest drop since July 7, and slipped 1.3 percent to 60.32 yen. Australia’s currency weakened 0.5 percent to 79.88 cents and fell 0.7 percent to 75.13 yen.

No Likelihood

The yen ended three days of losses against the euro after CIT said in a statement yesterday “there is no appreciable likelihood of additional government support being provided over the near term.” The company faces bankruptcy if no federal aid emerges, Standard & Poor’s said this week.

More than 1.5 million U.S. properties received a default or auction notice or were seized by banks in the six months through June, RealtyTrac Inc. said today in a statement. That’s a 15 percent increase from the year earlier.

The New Zealand dollar snapped three days of gains against the greenback after Fitch said it was concerned by the nation’s economic outlook and the size of its current-account deficit.

“The downward revision in New Zealand’s rating outlook may spark investor worries over whether the nation can emerge from recession,” said Tsutomu Soma, a bond and currency dealer at Okasan Securities Co. in Tokyo. “That could cause selling of commodity currencies, particularly the kiwi, and buying of haven currencies such as the yen and the dollar.”

Fitch Ratings

Fitch affirmed New Zealand’s foreign currency rating at AA+, its second-highest level, and affirmed the local-currency rating at AAA. New Zealand’s current-account deficit was 8.5 percent of gross domestic product in the year ended March 31.

The Dollar Index rose after the gauge’s 14-day stochastic oscillator declined to 5 yesterday, below the 20 level that signals an asset has fallen too quickly and is poised to gain.

The index, which the ICE uses to track the dollar against the currencies of six major U.S. trading partners including the euro and the yen, rose to 79.550 today from 79.370 yesterday, when it fell to 79.291, the lowest level since June 11.

“The U.S. currency has been oversold,” said Lee Wai Tuck a foreign-exchange strategist at Forecast Pte in Singapore. “This is probably just position-adjustment related buying of the dollar.”

Korean Won

South Korea’s won and Indonesia’s rupiah strengthened against the dollar after China said its economy rebounded from the weakest growth in a decade, encouraging investors to buy emerging-market assets.

China’s gross domestic product expanded 7.9 percent in the second quarter from a year earlier after a 6.1 percent gain in the previous three months, the statistics bureau said. Industrial production rose 10.7 percent in June from a year earlier after an 8.9 percent gain in May, the bureau also said.

“The recent slew of economic data and incoming indicators seem to suggest that the global situation is not as bad as the market had feared,” said Kengo Suzuki, manager of the foreign bond department in Tokyo at Mizuho Securities Co., a unit of Japan’s second-largest banking group. “This will put downward pressure” on the yen and the dollar.

The won strengthened 1 percent to 1,265.75 per dollar and the rupiah climbed 0.3 percent to 10,105. The MSCI Asia-Pacific Index of regional shares gained 0.9 percent after the Standard & Poor’s 500 Index increased 3 percent yesterday.

Record Yen

Japan’s currency will rise to a record 74 against the dollar in 2011, maintaining a 40-year rising trend, Wakabayashi FX Associates said, citing trading patterns.

The yen will remain on an ascending trend line that stretches from 1971 when the nation scrapped the yen’s peg of 360 against the dollar, said Eishi Wakabayashi, president of the Tokyo-based investment information service provider. The currency twice touched the trend line in the 1980s, once at 277.65 yen in 1982 and again at 262.80 yen in 1985, and has stayed close to it since 2004, he said.

“The dollar is likely to keep moving along a long-term downtrend against the yen that started way back in the 1970s,” Wakabayashi said in an interview. “Charts show the next target for the greenback is now 74 yen.”